Hey, I report an FO as incapacitated if at any time inflight they sneeze, yawn, or cough for more than 3 seconds. FAR's, they're not just a good idea, they're the law!
p.s. While I agree with you on the "incapacitation issue", I also don't think there's anything wrong with saying they were looking for mexicans. It's a logical assumption considering the circumstance. Maybe his tone was inappropriate considering the recent events, but I don't think the statement itself is indicative of any disrespect to immigrants, legal or otherwise. But as far as I'm concerned, anytime an annoying FO gets put in his or her place, be it by unfortunate vomiting, random bird poo assault, firm denial from the flight attendant, whatever, I have to appreciate the karmic balance of it all.
*Disclaimer* The vast majority of FO's I've flown with are excellent pilots; professional, personable, fun people to fly with.