I personally don't have any problem with the word foreigner. I live in Japan and hear the word foreigner often, but it doesn't bother me, because that is just a fact; I AM a foreigner. Whether I feel like an outsider or not depends on how people treat me. As long as I am treated with respect, I have no problem.
In general contexts, I don't think there should be any issue using the word "foreigner." But this is likely the subject of debate and this is just my opinion. :)