That sort of reasoning is incredibly easy to turn around.
The factors for and against a change like this need to be weighed for each individual change, and shouldn't be decided by blanket ideas of censorship and creative purity. And when I put "someone might be upset because this game seems to demonize a real group of people" and "someone might be upset because one word was changed from the original Japanese in an old game they like" on the scales... the second carries zero weight, even in what I would consider this generally inconsequential issue, where the odds of either of those possibilities is low. A video game is not a museum or history book, it's not necessary to keep every single wart of the past on general principle for the future's edification, especially since the original content is still available.
So I stand by my original post. If OP feels like the implications of the original name warrant a change, then change the name.
Side note: "People have seen worse" is also a terrible argument for anything, and generates all kinds of logical absurdities. "This bad thing is okay because it isn't the worst thing" can be applied to argue that basically anything is acceptable.
tl;dr: Some types of offense are more important and should be catered to more than other types of offense. Offend people offended with the second kind with zero restraints, because words in translations from foreign cultures are dangerous and violently harm those who choose to be offended by them, context and responsibility be damned.
Isn't that what you are trying to say?
Look, I get that you are totally a fan of more fan translations
"purifying" the source material in similar cases, and not as much a fan of the translator's internal dilemma over staying true to the original intent or trying to signal it somehow somewhere even as a disclaimer since these useless feelings get in the way of your preference.
But to try and imply there is moral superiority or logic in prioritizing offending some people over others is simply... very off. It's counterproductive even to defend censorship, since you never know when the next cut that chooses you as the "acceptable offense target" would come. That historical pile of useless past artifacts you despise so much has no shortage of cautionary tales against this.
Horrible time to be a translator right now if they have this responsibility for anything they translate. Even medieval theocracies, the pyre happy kind especially for suspicions of heresy, had more leniency with translators conveying foreign ideas and knew better than to burden them with cleaning them up, for practical reasons (since the resulting work wouldn't represent its original, and would be simply useless to get a complete fair evaluation and appreciation of that work).