Please explain when and where to use the terms Theravada and Hinayana I understand that Hinayana as a term is generally pejorative when referring to Theravadin practitioners. Where is the use of the term Hinayana proper, and why is it still used if it's considered offensive to Theravadin practitioners?

I believe that the term Hinayana is mainly used in the context of displaying "faulty" logic by earlier schools of Buddhist philosophy than the Madhyamikas. Can you say more about this?
The term Hinayana's usage is confused at best. It's mostly used now as a synonym for Theravada along with some other early Buddhist schools, but some people think Theravada needs to be specifically excluded from that group. From Pali Buddhism, Hoffman/Mahinda:


  It has been a repeated mistake to identify Hinayana with Theravada.
  But at this juncture the denial of the absolute and independent dharmas itself
  testifies to the fact that Theravada is neither Yogacara nor Hinayana.
  Some scholars continue to make the mistake of identifying Hinayana with Theravada.
  The Theravadins themselves never call their religion "Hinayana."
  Therefore, it is inappropriate for anyone to dub them with derogatory names.
  A few Buddhist schools, such as Sarvastivadins, claimed the existence of
  independent dharmas and mainted the pluralistic realism in the early history of Buddhism.
  Theravadins were not among them.
  All in all, Theravada is not Hinayana, and Hinayana is not Theravada;
  therefore, the criticism of Hinayana does not fall upon the Theravada.


I think the idea here being that the term Hinayana arose as a point of doctrinal criticism, one which Theravada did not practice, so it's not valid to use here.

But somehow I'm willing to bet no one but scholars views the term Hinayana so narrowly within its historical context. I think the term has evolved past its original scope.

Hinayana is mentioned in Robinson/Johson's The Buddhist Religion: A Historical Introduction:


  At any rate, because Buddhist monastics were wandering the length and breadth of India,
  the anti-Abhidharma partisans eventually joined forces with the new Buddhist savior cults and other like-minded
  factions to grow into a widespread movement calling itself the Mahayana
  (the Great Course or Great Vehicle--yana: a going, a course, a journey; a vehicle).
  
  This was in contrast to the Hinayana (the Inferior Course),
  the new movement's pejorative term for those conservatives who did not accept the new doctrines as truly Buddhist.
  Because the conservatives answered the Mahayana propaganda largely with silence,
  they did not adopt any name for themselves as compared with Mahayana.
  Consequently, modern scholars have given them the name their adversaries gave them, Hinayana,
  although without implying any deprecation.
  
  Modern Theravadins do not like being called Hinayanists--who would?--but
  there is no other current term that designates the whole set of schools that arose between the first and the
  fourth centuries after the Parinirvana and continued after the rise of Mahayana.
  The term Nikaya Buddhism, for instance, accurately applies to these schools before the rise of Mahayana,
  but not after, as Mahayana formed a subgroup within each of them.
  Continued usage of the name Hinayana may expunge all derogatory connotations of the term.
  Quaker, Mormon, and even Christian similarly started out as labels sarcastically attached by outsiders.


I feel it's probably true that only some portion of the people throwing around the term Hinayana actually intend it to cause damage, the rest use it because what other term could you use? You can't just use "Theravada" for everything non-Mahayana and non-Vajrayana.

I find myself coming around to the view expressed at the end, of viewing the term without the derogatory baggage.

Because people often translate Hinayana as "inferior" vehicle, and of course that was the original intent, but I believe it literally means "smaller", which doesn't have to be an insult. The Buddha's concern in the Pali Canon does seem to be individuals, personal action and personal liberation from suffering, not the grand salvation of the universe, extraterrestrial Buddha fields, cosmic Buddhas, etc. 

It is indeed a smaller vehicle by comparison.