1718, from Mod.L. propaganda, short for Congregatio de Propaganda Fide "congregation for propagating the faith," committee of cardinals established 1622 by Gregory XV to supervise foreign missions, prop. abl. fem. gerundive of L. propagare (see propagation). Modern political sense dates from World War I, not originally pejorative.
That's all well and good, but I actually want to highlight one of the recent propaganda (modern sense) items provided by a few papists on the word "papist." One of those items is that word was originally conceived by those persecuting the papists.
1534, "adherent of the Pope," from M.Fr. papiste, from papa "Pope," from Church L. papa (see pope).
Notice the actual etymology - not a term of English coinage but a borrow word from Middle French. Moreover, while the term certainly was employed at times when the papacy was resolutely opposed in England, the "persecution" as it is sometimes characterized was not principally religious in nature.
Papists were perceived as a political threat to at least some of the folks in the English Monarchy, especially Henry VIII and Elizabeth I. This was not simply a pretense to put down Catholicism, but a genuine and legitimate concern coming out of the medieval period during which the popes and their minions frequently meddled in the political affairs of Europe.
So, in short, no. The term "papist" was not coined as derogatory term, nor need it carry derogatory connotations. It does not (contrary to the most bizarre piece of propaganda I recently received) mean "pope worshiper." Although some people do use it in a derogatory manner, you will not find this blogger using it that way, but rather in a way that is descriptive of ecclesiology. Yes, some dictionaries have seen fit to label it as derogatory, but hopefully any sincere papists who read this blog will not fall prey to propaganda but will look to the intention of the word, which highlights an important difference in church structure between us.