I never hear anyone say it. Except on telly. But I agree, when uttered without venom it is much less offensive. Although Bryony may disagree!
Is the word ' bloody' more or less offensive in America? It isn't that bad here, at all. It just means 'By the lady!' ie, the Virgin Mary. It is blasphemy.
The C word is the other word we were talking about, Riaz, and I have NO idea what telly Emma has been watching! Not the sort of telly I watch, anyway! I hear it mostly between idiot men in pubs who have had a little too much and want to show off somewhat.
I think I first heard it in the Film Snatch. (NO NO NO - Snatch as in grab)