Everyone gets turned on by something... its not wrong, if you enjoy it and its in the context of a safe and caring relationship moment. Some people get really turned on from being called names that evokes an instantaneous, strong emotional reaction (i.e. words that could be insults in a different situation can be stimulating.)
When I'm really hot and bothered and doing nasty girl things to my husband, I get turned on when he calls me his personal whore. However, if I were in the grocery store minding my own business and he called me that, I would have a major problem that I'd hire an attorney to fix and fight for half of everything. (maybe not to that extreme, but you get the gist...)
BDSM is known for using name calling to trigger a strong and sexually internalized "humiliation" response or re-establish top and bottom positions (power play).
I agree with #1. As long as he keeps the name calling on a private level, and you both get off on it, cool. I call my wife a cocksucker and a slut in bed, but no where else. Its only for the sexual turn on we get from it. (By the way its true. Before we met, she was quite the little Blowjob Queen). But when we are in public, or around other people, she's my Darling Wife. I always give her total respect, except during sex.