That's one use of it, but I'd take a look at the second listing under Merriam-Webster before you assume its the only one.
That's a rather unconventional or archaic usage when used without an adjective, I'd suggest. If someone says "racial epithet", you know it'll be hateful, but you using epithet as a negative word without anything else is maybe the first time I've seen that in the last two decades.
As to the negative use of power-gamer--that goes all the way back to Glenn Blacow who originally popularized it; while he avowedly wanted to just use it to contrast with the other three styles he was presenting, it was abundantly clear he considered it a negative and that propagated outward. It was usually treated as a near synonym with "munchkin" (though the latter had connotations of lack of skill and/or cheating that the former didn't).
Glenn Blacow's 1980 definitions didn't survive contact with the enemy, though, and it was certainly dead as a doornail by the time I got into discussing it on the internet in 1992. Indeed if you read the
full definitions, you can see, for example, what he calls "storytelling" is absolutely
nothing like what people meant by the term later. Instead it's something closer to being "railroaded in a sandbox", with a weird melding of living world and metaplot concepts, as bizarre as that idea might seem. By the time I was around in 1992 you had a different set of four (now mostly gone from the internet) - usually the roleplayer, the power-gamer, real man, and the loonie. Sometimes one was replaced - often but not always the power-gamer by the munchkin, but where that happened the description was changed - "the munchkin" clearly had somewhat different habits and desires to "the power-gamer". By the mid-late 1990s "power-gamer" no longer even arguably met Blacow's "acquisition of power" definition, because games had moved on, and since the late '80s and early '90s games, including your HERO/Champions, were no longer about gaining power by finding stuff or taking stuff, but had much more potential in building powerful characters. Arguably this "de-fanged" the Blacow-style power-gamer and replaced him with a builder. In points-based games it was rare to have a situation where much power could be seized (and when it was true, like Diablerie in VtM, it was typically very risky), so the concerns he espoused basically evanesced.
To me munchkin and power-gamer mean pretty much the same thing. I'd rather not play with either, given the choice.
Interesting. I think this must be a generational or cultural thing. They were highly distinct by the time I was a teenager on the internet, but maybe that was because I was hanging out with Shadowrun fans.