There's a good discussion on this topic in the discussion boards...
My students are dealing with this same issue right now. We must take into consideration that the word "nigger" was not objectionable nor was it offensive during Twain's time. Huck and his friends were born into the slave culture and knew no other way of life. To them, this word was just another word... no connotation whatsoever. Nothing like the offenive word it has become today.
The novel would not be as impactful, honest, or truthful if the word were removed. It must be there to completely depict the time period in American history.
On the contrary for the racist issue, Twain fully recognized slaves as people with feelings and dreams. One look at the character of Jim should be proof enough. Jim is a well-rounded character whom we all come to love and root for as he faces adversity. Twain consistently satirizes the hypocrisy of the church and the Southern Bible belt folks with their Christian beliefs juxtaposed with the buying and selling of slaves daily.
The 'n' word was common during the time period and Twain was writing a realistic, regional novel complete with regional dialect.
Something else to consider when asking if Twain is racist - examine how he portrays the blacks during that time period. Although he speaks in the slave dialect of the time, Jim is one of the most honorable and respectable characters in the novel. He is honest, loyal, trustworthy, and he gives his life/freedom for Tom even though Tom doesn't deserve it. In contrast, the white folk in the novel are for the most part lying, corrupt, ignorant, and racist themselves.
Chapter Eight Jim says...
"But I noticed dey wuz a "N" trader roun' de place considable, lately, en I begin to git oneasy."
With Jim saying this shows that it was indeed the language of the time.
The other posters are right also. Jim is a pure and honorable character, if Twain was racist, then this would not have been the case.
Also Twain's other works don't show any signs of him being racist.