My approach to the PC/PI problem has been to learn the original, then think long and hard about where and whether to change it for certain audiences.In Old Kentucky Home, for example, I keep the word "darky" everywhere when I sing it for myself. I think Foster had a lot of insight when he wrote, "The head must bow, and the back will have to bend, wherever the darky may go...." To me, he was saying that life was innately hard for black people because of the terrible system they lived in. All the same "darky" is a terrible word. Not as hateful as "nigger," but still condescending, insulting, patronizing. So what do you do? In general, I'm fiercely in favor of leaving a song the way you found it. But I cringe when I hear the uncensored versions of some of Foster's songs. I wouldn't want to sing the original words for school kids, for example.
So sometimes I look for a good substitution, eg "wherever the laborer may go."
About GOOD substitutions. If you just substitute "person" or "people" everywhere Foster said "darky," it weakens the song. Anyone interested in comparing ideas on that? (Maybe needs a new thread?)
I think Jeff Friedman's suggestion of discussing any changes we've made and the reason for them is a good one that allows us to recognize the tradition while repudiating the state of mind.