The reluctance of the native inhabitants of Scotland to accept descriptions of themselves as Scotch or the use Scotch as an adjective except in a limited number of cases is a modern affectation. The celebrated lexicographer R W Burchfield has some interesting things to say on this topic:
“Scotch. Scots, Scottish. It is not possible to set down here all the complications of this somewhat sensitive group of words. The adjective Scotch, in origin a contracted variant of Scottish, ‘had been adopted into the northern vernacular before the end of the 18th c.; it [was] used regularly by Burns, and subsequently by Scott’ (OED). But ‘since the mid-19th c. there has been in Scotland a growing tendency to discard the form altogether, Scottish, or less frequently Scots, being substituted’ (OED). Scots is also a long-standing variant of Scottish. The outcome is that all three adjectives are still current, but Scotch is the least frequent and survives mainly in certain collocations, e.g. Scotch broth, Scotch egg, Scotch mist, Scotch terrier, Scotch tweed, Scotch whisky, and a few others. Scots is the term regularly used of the form of English spoken in (esp. Lowlands) Scotland. It also occurs in the names of certain Scottish regiments. But the all-embracing general adjective meaning ‘of or relating to Scotland, its history, its day-to-day life, or its inhabitants’, is Scottish. These are middle-class preferences. ‘Paradoxically,’ A.J. Aitken reports in OCELang. (1992),’for working class Scots the common form has long been Scotch … and the native form Scots is sometimes regarded as an Anglicized affectation.’ Outside Scotland, and esp. outside the UK, Scottish preferences are less well-known. Scotch is likely to occur, both as adj. and noun, in contexts which middle-class Scots would regard as either droll or improper.” R W BURCHFIELD (ed.): Fowler’s Modern English Usage. 3rd ed, Oxford, Clarendon Press, 1996. ISBN: 0 19 869136 2.
The use of Scotch as noun and adjective was not limited to such luminaries as Burns and Scott (David Hume, Boswell and Adam Smith can be added to the list) but was widely used by all classes until quite recently. I have been visiting Scotland since the 1950s and can vouch for the fact that until the past thirty years or so Scotch was still being used frequently as no more than a synonym for Scots or Scottish. The fact that Scotch is still used for Scotch mist, Scotch terriers and so on is in itself a firm proof of the ubiquity of the word in the past because had it not been commonly used it would not have attached itself to so many mundane items.
The fact that the Scotch or Scots now try to insist on being called only Scots is a symptom of victimhood which is itself a form of inferiority. Peoples who are confident in their existence do not try to insist on foreigners calling them one thing when the foreigners have always called them something else. (This is a trait most starkly seen in the case of blacks: in the past 70 years the polite term for this group has undergone the following transformation: negro-coloured-black-afro-American-Afro-Caribbean-African.)
The English have traditionally called the natives of Scotland Scotch. They should continue to do so, just as they should refer to Bombay as Bombay and Burma as Burma. The renaming of things, places and peoples is the habit of the totalitarian not the free society.
A people have the right to call themselves what they wish: they do not have the right or power to enforce it on others. For foreigners to allow themselves to be coerced or manipulated into using a term not natural to themselves is bend the cultural knee to the demanding nation.