Briefly: If you're using a quotation, and it's in quotes, you have to use the original words, otherwise it isn't a quotation.

I think an argument can be made that if the text is directed at children, it should be bowdlerized, but then don't pretend you're quoting anyone. Just leave that out.

If you're writing for grownups, treat them as such.

Growing up in America as I did, I thought the term 'Jerry' for German in WWII was pretty innocuous, like calling him 'Fritz'. And it was mostly an English term. Americans didn't typically use the term 'Jerry' or 'Hun' and I never thought of them as being used or taken offensively. They don't have a harsh tang or reference, at least to this American. The term 'kraut' comes up and defintely has a pungency, because it appears to refer to sauerkraut. But I'm not aware that there is any racial epithet for Germans because they're just white folks. And probably more Americans until recently are at least partially German than any other European stock. I remember reading in Andy Rooney's wartime reminiscence that as the European war settled into an occupation, the Americans discoveed that the people they were most 'like' were the Germans.

Shortening the word 'Japanese' to its first three letters never seemed such a terrible thing to me, but it's how a word is taken not how it is offered that dominates, and I would never use it on my fellow Americans of Japanese descent, some of whom are my relatives. At the same time, a quote is a quote.

As for racial attitudes, the war itself modifed our racial attitudes, and for sure that of the Germans. It probably affected Japanese racial attitudes the least.

As for Mark Twain, I wouldn't change a word of Tom Sawyer or Huckleberry Finn. Mark Twain made no casual use of the n word. He knew exactly what he was doing, he was talking about racism, only in words suited to his upbringing and his times. There's a famous interchange that takes only a few lines, but in the passage of question and answer and a single use of the n word, volumes of bigotry are expressed, far beyond any particular race.

one of the main characters refers to a boiler explosion:

"oh dear" says a kind old lady "was anybody hurt?"

"no'm" is the answer, "killed a n-"

Twain knew precisely what he wanted to say and how he wanted to say it.

So did Rodgers and Hammerstein in South Pacific with the song "You've Got to be Carefully Taught"

You've got to be taught
To hate and fear
You've got to be taught
From year to Year
It's got to be drummed
in your dear little ear
You've got to be carefully taught

You've got to be taught
To be Afraid
Of people whose eyes
are oddly made
And people whose skin
Is a different shade
You've got to be carefully taught

You've got to be taught
Before it's too late
Before you are 6 or 7 or 8
To hate all the people
your relatives hate
You've got to be carefully taught

sung by a character who has been taught and cannot escape this teaching despite being made aware of it.