I would hesitate to call Gunga Din "racist." It portrays racism and the effects of racism very effectively, but it certainly doesn't promote racism. I'd hate to see literature like this be suppressed. We need to understand the racism of past years in order to recognize and eliminate it in our present time.
Same with Huckleberry Finn and To Kill a Mockingbird and many others.
I also think we need to see the "n-word" and hear it, to understand its impact. I don't think it's helpful to euphemize things. If we don't understand, then we're likely to deny.