What's the point of calling someone they to their face? No one will refer to you as they unless they are talking to someone else about you. Same goes for the pronouns he or she.

Dear Dance Like a Gypsy,

Yes, at times there can be good reason to refer to someone as "they" - as well as other 3rd person pronouns, he she - when that person is present.

Some years ago the idea came up that doing so is insulting and demeaning; it became another issue of political correctness. 

In this case, using the 3rd person in this way can be a loving colloquialism that has no good replacement...and so here, the listener needs to take some responsibility for understanding and appreciating what the speaker is trying to communicate.