From what I've been told, I don't think I'd call it racist. Cotton-eyed is what some people called a blue-eyed black person. The first version I first heard was Josh White's which, if memory serves, has the same verses as Lorne's. Then there's the old time fiddle tune which is often used to accompany square dance calls. That one also has verses but I've never heard any sung that were offensive. That's not to say they don't exist; I just don't know anyone who sings 'em.