It wasn't Jar Jar being racist... It was ppl complaining about the character because he was seen as a bit stereotypical of blacks. The complaints varied from Jar Jar's voice... to his walk... to his manorisms. In fact, I remember reading that the complaints were so bad after the character was introduced in Episode 1 that George Lucas considered dropping the character for ep 2. I'm sure google could shed more light on that topic though.
I didn't mind the character but I thought it was a stretch to make him Naboo representative. However; it did make for a nice way to nominate Palpy for supreme chancellor in the story line. Who else would have been stupid enough to make a motion to grant supreme executive power to someone? Although, someone could argue that it was Palpy using his mind tricks to get Jar Jar to nominate him.