Since you specified spoken English, I would say it is correct. To me "proper" is a word like "respectable," in that it means little to people who don't buy into propriety or respectability. Frankly, I would use "long time no see" in writing as well.
If you think about the meaning of the phrase, why would you use a breezy greeting like that if you don't know the person you're addressing? So the question of its being "proper" is moot-- the sentiment is not something you're likely to express in a formal situation, so why worry about its wording? .