What were his previous aliases? I know of a couple of mouthy folk running around DOW.
Nevertheless I must say they do it because of the reaction it provokes. Rather than getting stirred up by it, or over-dramatising it when ultimately all that they're saying is exhibiting extreme views no different from that of any religious minority, I just ignore it. Everytime a black guy squirms at hearing somebody say nigger it makes racists want to say it even more. If somebody wants to offend a gay person they don't go "you're just fucking gay", because they're used to hearing it and it gets diluted with time, so they try and mix it in with something else that they may find offensive such "you're such a queer-dirty-assed-faggot", which is offensive on many levels, but ultimately if it's ignored they'll stop doing it.
Good job yourself though for not responding to him in game at least, clearly it frustrated you enough to make you post this.
What I usually do to these people is treat them in accordance to their behaviour; they clearly don't exhibit any real sense of rationality or humanity and so I talk to them and refer to them as cattle, worthless cattle. Their very existence only coming about because of an absence of restraint on behalf of their mother. Their lives to be spent working ceaselessly for absolutely no purpose or fulfillment whatsoever, only to be slaughtered at the grand old age of 70 odd by some painful disease they never even thought would kill them. Locked in a pen with no individuality, no goals, no purpose, just there soaking up moisture and oxygen. I then finish the meal with a serving of The Hell or a similar band:
http://www.youtube.com/watch?v=mORDIiTiglQ&t=1m5sJust fiddle with the lyrics a little and you get the very appropriate:
"You will never know how much you fucking disgust me,
Your stupid shit will never fucking impress me,
Let's go back to school,
It's time you learnt to shout,
'Cause the immigrants are in,
And you filthy racists are out"
That immigrants thing will probably rile them up, despite, of course, the fact that most black people in America were born there and aren't immigrants. I mean it's just so beautifully ironic. Screaming to the racist nationalist about how the immigrants are all in and they're out and treating it as success and the way of the future. Delicious. Rip them to pieces Gorilla.