From my time in paediatric neurology a decade ago, 'retarded' has been replaced with 'developmentally delayed'. I have yet to see that enter into use as a pejorative, and frankly there are too many syllables for it to do so. It's not unnatural, not a euphamism, and is an apolitical description of what's happening: we haven't determined a specific issue with the child, but the child is not hitting the developmental milestones one would expect for the age.
I'd also strongly contest the 'nothing to do with better understanding', given that we now have multiple ways to classify mental issues, where previously they were all lumped into huge, overbroad groups.
Isn't "developmentally delayed" lumping everybody who didn't hit the certain set of milestones into one huge, overbroad groups? For one, some of them may be "delayed" - i.e. they may catch up with these milestones later, but some, unfortunately, would never reach them, in which case "delayed" is plainly misleading. Is is a wrong definition or feel-good term that is incorrect in fact?
Nope.
Edit: I guess I should elaborate. Developmental delay is an indicator of a problem. It's not meant to be a final diagnosis - where possible, a reason for the delay is sought out. 'Developmental delay', like 'mentally retarded' is a symptom - it's just in olden days it was left there; the root cause was rarely sought.
Yes, the term can be misleading, and I don't like it for that reason. But it's not 'feel-good' nor incorrect in fact. It's an accurate description of what is happening.
Of course, there's another way - making the euphemism so clunky and unnatural that nobody outside of professional context would be willing to use it. Thus things like "differently abled".