@RP: I think that's well put. Thanks!
As for me... I love using labels as a shorthand. On here, for example, or when first explaining something to a person, it's so much more convenient to say "my vee" or "my primaries" or "hot bi babe" or whatever word is in common parlance, than it is to use my idiosyncratic, more accurate label. Like RP said, being descriptive rather than prescriptive is often the key to how I feel about it. ("I have to be female and fit in this box" is far harder to live by than "I have female genitalia and dress as a woman, so that's how I choose to gender myself".)
I think the appropriateness of using a self-label varies-- probably by how closely I fit the conventional definition of the term. I am hard-wired poly (to borrow Mono's language) and female, but my preference for gender in a partner is much harder to pin down. I say I'm bisexual when asked, because saying I'm 'heteroflexible with a girlfriend from the waist up' doesn't make much sense to strangers!
As for labeling others.. I do my best to use whatever labels the person I'm speaking about uses (or would in that situation, ex. if closeted)... and it's so important to ask rather than assuming! I actually completely missed an ex hitting on me because he switched from the 'gay' label to the 'bi' label when he was flirting with me, and I didn't notice until he confessed his love a year later!