Isn't it simpler than that? I mean I totally agree with the funny vs. appropriate thing, but I boil these questions down to the basic fact that everybody gets to choose how they act and what they say. Part of that choice should take account of how your actions affect others (unless you're a butt, in which case you're just a butt). I could make a crass joke that might make someone else uncomfortable, or worse. Not being a butt means as soon as I think someone might be offended the concept of funny is irrelevant - I am making a choice between offending someone or not. The funny part doesn't even come into it. Of course because I'm human I might offend someone inadvertently in which case my only salvation from butt-dom is to say sorry in some meaningful way and learn from the experience. And part of that continued enlightenment is that stuff that's offensive generally isn't funny anyway.

So I'd kind of turn your principle around and say if it's not appropriate it really isn't funny. Because funny things are appropriate. Making people feel less than good about themselves saps the funniness from funny. In the big venn diagram that describes this there's a circle with "things people think are funny that aren't appropriate" and it's completely within a bigger circle marked "butts".

Julian