IDK about your specific server experience there with that or any other player and I generally see what you've said as a positive suggestion for the community. It shouldn't be a joke or game. However, since you didn't mention it, I will say that there is a very specific time and place where the idea of goading or 'baiting' a player into typing a certain particular gamer word in chat is very much a good thing, not really a game, and - although, ideally, it wouldn't need to occur - it should not reflect poorly on the community.
(Again, IDK if this is the context for any specific situation which you witnessed/observed): When a rando blue name joins the server and starts mouthing off in voice comms, drawing on signs, etc., in racist or other harassing, anti-server-rules ways, the community player who observes this only has a few tools for dealing with it. We can report the player in-game, call upon any admins who may be currently present via the global chat, and, finally, tag the server in discord 'help' with the same call for an admin to get involved. The one instance I mention is in that situation where all that has been done and an admin simply hasn't seen the 'help' request yet or otherwise been able to step-in from their side of things. When this happens, particularly late at night where it could be hours of waiting where that player is continuing to act that way, I've witnessed instances where community players present have reacted by goading the player via global chat to get the player to progress from just saying the words, to just once typing it in chat. When that happens, the server's automatic response kicks in and the player is banned. It's not 'fun,' but it can look like a 'game' at the time, particularly if you're looking at it solely through the lens of global chat and aren't actually one of the people who are having to hear/interact with the person in-game. If this kind of effort or point wasn't at all the case in whatever instance you've mentioned, then yeah, I can't think of any case where trying to get someone to say/type any kind of slur would be remotely acceptable. I don't even know if I'm advocating the one 'exception' I've detailed, but I will say that I have seen it occur in a way that cut off that outside negative influence on the community in pretty much an instant.
The only other thing I'd say is that if 'baiting' someone instead means pretending/catfishing another player into thinking that you, yourself, are racist, homophobic, etc. and that their actions will be permissible, agreed-upon, or 'backed up' by you or others if the player posts that way in global chat / up on a sign, etc., then that's not permissible IMO and should be considered breaking server guidelines / reported to an admin, the same as any racist behavior. The community reacting to an outsider and getting them kicked from a server asap while an admin isn't available is one thing. Someone within the community being the one who introduces that theme of racism, homophobia, sexism, etc., though? If that's the case, get 'em gone.