My friend, you can't have it both ways. If he "made a mistake" and then humbly and profusely apologized, then you could maybe pretend it was accidental... But that's not what happened, right? He didn't apologize because he meant it.
We will never, ever, look bad for calling out racism when we see it as clearly as we did here. But we would certainly be horrible human beings if we decided to pretend it wasn't happening.
Anyway, of course you can do what you feel is right. For me, it's simple. Fuck that racist motherfucker.
Calling out horrible behavior openly is the winning move. Honesty and integrity matter.