There are a lot of racists about, and there will be a lot of different reasons why they are that way. For some its just a default position that makes them part of a 'club' - they don't actually think about it properly, its just a point of view they subscribe to.
My dad is pretty racist at times (he's 70 too) - and there's no defensible reason for it, and he's an intelligent man so I'm amazed at him - but its such a fundamental part of his world-view that I know he'll never change his mind. The most he will do is to admit that 'well, the ones I've actually met have been very pleasant people, yes'. (!!!!!!!)
As Kendall says - confrontation will polarize - they'll just dig their heels in. Whether you can educate them is another matter. When these people were young (and forming their characters) Britain was much, much less multi-cultural. They will have been fed all the Empire propaganda about 'primitive darkies' etc etc.
Rationality doesn't come into it.
I don't think you should make a hasty decision to cut off from these people. They need to mix with people like you. Otherwise, if they only get to mix with like-minded people then they will just reinforce eachothers prejudices. My advice would be to carry on seeing them, and just to quietly and calmly disagree with them - or show your disapproval by walking away when they start in with that stuff. If you find that over time it drives a wedge between you then you will probably drift away from them anyway. A hasty breaking-off might just cut off your own nose to spite your face - there is presumably a side to them that you do like? Don't forget there's good and bad in everybody.
Also - is there any possibility that this was mainly just beer talking? Might they have been winding you up a bit? - sounds unlikely, but possible.
I hope you can sort it out & remain friends with them, and that they'll learn a bit of sense off of you!!!

Kris