Etymologically it's rather nasty: the word was coined in either Spanish or Portuguese as "mulato", as a reference to mules ("mula" - horse x donkey hybrid).
In Portuguese it seems to me that this association faded away. However, I'm going to take a guess and say that the word is probably a slur in English, so not something that you want to use for its meaning.
I've only encountered the use of mulatto once in the wild. My girlfriend my freshman year at college had an adopted brother who was biracial. She used the word mulatto to describe him, but at the time everything she said about him seemed very loving.