Do People Really "Convenience"?

I listen to the Popup Chinese podcast feeds (for free, no I don't have the money to pay for lessons) in order to get a little listening practice while I have no Chinese classes and don't always have the time or persuasive power to get my Chinese friends to talk to me in Chinese.  The last elementary session brought up a vocabulary term that I have been wondering about for some time: 方便

方便 (fang4bian4) is a Chinese euphemism for using the toilet.  It's literal meaning is "convenience", and it is believed to be derived from translations of Sanskrit Buddhist scriptures, and that the use as a euphemism for our unpleasant excretions started among Buddhist monks.  What has confused me about this term is the way Chinese friends have reacted to it.  Here are the reactions I've gotten:

  1. pleasant surprise (the usual response when you use something Chinese don't expect you to know about)

  2. saying it's unnecessary (some prefer me to use the slightly cruder 上厕所)

  3. not nice enough (a few female friends have told me this, saying I shouldn't even imply what I am doing)

As  I stated, #1 is pretty much expected.  Saying even a single word of Chinese will get praise from strangers, partly out of flattery and partly from surprise at seeing a white guy who speaks Chinese.  But #2 and #3 have always interested me.  It seems that in some cases, I'm being "too polite", like someone who uses very bookish and sophisticated language while hanging at a friend's house, while in other cases I end up feeling my friends seem a bit like uppity Victorians.  It seems a lot more complex than, say, when I decide to show off my vocabulary of curses (which almost invariably ends with people labeling certain terms as too vulgar or dangerous for a foreigner to use ... EVER).  I wonder, if any Chinese are reading, how do you deal with 方便?  When is it appropriate, and when isn't it?  When it's not appropriate, what do you say instead?