There was a British charity, The Spastic Society. They became fairly high profile in the early 80s being involved in children's magazine shows for fund raising. Often children with conditions would be featured. The intent was that featuring them would make the condition more relatable, but kids saw them more freaks to be mocked.

It resulted in "spastic" / "spaz" becoming school playground taunts to the extent that the charity changed it's name to avoid the term.

"Spaz" as in to "spaz out" has always meant crazy or some variation on that where I grew up, though I haven't heard it in ages. I suppose it is ableist, and I suppose we always meant it that way, I just never thought of a person with a disability when I said it. The flip side of that is, by so casually likening someone to a differently abled person in a prejudicial way, one demeans the differently abled person, even if they weren't the target of the ire or the ridicule.

So we were definitely in the wrong for using it.