I still don't see the point in insults whatsoever. It doesn't do anything but spark and fuel needless fires. I just laugh at insults thrown my way now. I mean, come on. "Shartfang"? "Softfart"? Can't you do better than that? That's not even a smart insult either. >.>
Matters the situation. If an idiot is calling you an idiot for a good reason, then the verbal value increases, since an Idiot is "allowed" to call you an idiot in comparison to himself. It's the same with smart people calling you smart, it increases in verbal value because it's in comparison to something already having that attribute.
But it also works the other way around. And idiot calling you an idiot for a false reason, such as "not being able to get a convincing argument, thus trying to demoralise you by calling you names" is something you could take as a joke, but a smart person calling you smart without a valid reason is demoralising since it's probably sarcastic.
either case, a good laugh is not equal to a boost in pride for your morale. It's like you're comparing food with machines, they are two completely different effects, and thus... The stamp is wholly based on opinion, not facts.
This is how the insults system works with the guys at my school. I just want to laugh like a hyena at it, but then there are people who will question your sanity for that, so I think it's better to do it in the safety of my mind ^^