Why do you think Morrison would choose to include racial slurs when telling the story of how the hilltop town of Medallion came to be called "The Bottom"?

Morrison may have chosen to include the racial slurs to underline how pervasive racism was in her time. The unofficial name of Medallion (The Bottom) was actually derived from sophistry and deception; essentially, "The Bottom" was a cruel joke played by a white farmer on his slave.
According to Morrison, a white farmer had promised his slave freedom and a piece of bottom land if he consented to perform some very difficult chores. Bottom land is a reference to the fertile land of the valleys (as opposed to hilly land). However, the white farmer pretended that the hilly land was actually bottom land (or valley land). Unwilling to part with the fertile land he owned, the farmer tricked his slave into believing that the hilly land he was giving him was essentially good land. He even reiterated his lie by asserting that the hilly land was the bottom of Heaven and "the best land there is."
However, the slave soon discovered the lie when he tried to farm the hilly land, where "planting was backbreaking, where the soil slid down and washed away the seeds, and where the wind lingered all through the winter." So, the racial slurs Morrison mentioned underlines how the slave was played for a fool by the white farmer. It also highlights the themes of suffering and betrayal in the novel.