Well, with how diverse the world is anymore, it's kind of hard to draw black and white lines on who to portray as "good" or who to portray as "evil". I wouldn't say that racism is so much of hot button topic in gaming anymore. Not as big as stereotyping is anyway, and that's why you see different cultures being portrayed as "the bad guys", or why only white guys with big muscles or a lot of guns can be portrayed as the "good guy". But even my elaboration isn't wholly descriptive of the gaming market because there are SOOOO many different games being made.
You can't really look at the shooter games here, (mostly the Call of Duty and Battlefield games) because they don't really innovate in a way that we're seeing the true side of this "evil" culture. The only thing players seem to notice is that "Country X is only inhabited by squishy targets that explode into clouds of gore when I fire a rocket at them." Or at least that's how they're portrayed. All those two gaming franchises do is up the graphics, add a few more weapons and vehicles, and glance over the newspaper headlines to see who they can have the American "good guy" military take down. If anything I'd rather play a game where I was playing as one of the civilian soldiers in the Middle East to see how badly those people are being oppressed, not only by constant US military involvement, but also from their corrupt dictator-like government and guerrilla warfare gangs constantly roaming the streets and selfishly hogging the foreign aid packages sent to them by charities and non-profit organizations like the Red Cross. I digress though, shooters are a bad can of worms to open, especially since this concept of first-person view games isn't really new, nor is the concept of shooting things. Heck aside from platformer games and text adventures, shooters are probably one of the oldest genres of gaming.
Nevertheless, racism is still a problem in some games, but many of the worthwhile titles are really starting to explore different cultures and races as being equal opportunity adventures in being the "good guy" or just seeing what each culture does. Such examples would be the Mass Effect series, the Elder Scrolls games, Minecraft (more so for the community than the game itself), Assassin's Creed, etc.