As far as I understand, the term seems to be used in different ways. A Briton living in AS territory might be called "wealh" meaning slave. On the other hand, the same word was used for someone from elsewhere - a foreigner and specifically a Welshman. The term seems derogatory like the Cape Dutch "Kaffir" or American "nigger". You also get Norðwalas for North Wales and Norðwealcynn for the Welsh people.