Is this racist?

Pakistanis are not a race.

You would, presumably, regard "Paki" as a racial insult??

However if someone deems it to be offensive then to them it is offensive, you can't deny that. Offense is a personal thing, whether someone is being over sensitive depends alot on context. Down a pub amongst mates you can say things a lot differently and a lot of different things than you can if you are putting yourself in a interview.

I'd like to retain my right to offend people about their beliefs, ie. things that they have chosen. Even attempting to offend someone about something over which they have no control over, seems to me where the line is crossed.