Which is worse?
Genuine question. Which is more repellent? Background here.
UPDATE: In comments, Thersites makes an eloquent argument for Door #2:
Both are repugnant but I'll go with B as being more repugnant.
My wife and I had some ugly experiences in our former home in outer suburbia.
The people who called my wife a n****er pissed me off. But we knew who they were, and where they were coming from.
The "good" people who pretended that the incidents didn't happen, or made excuses for the perpetrators, they pissed me off, broke my goddamned heart and made me deeply ashamed of my community. We finally got the hell out of there but the bitterness will last a lifetime.
So yes, the "good" people who turn a blind eye, for any reason, are far more repugnant.
Turning a blind eye to racist sentiment is, obviously, far more common than overt racism these days. But as Thers says, that very fact can sometimes make it even worse. After all, everyone already knows that the world contains a few virulent assholes. In some cases you can shrug that off. But learning that lots of people who otherwise seem perfectly decent are willing to tolerate it? That can be pretty disheartening.
Still and all, lots of us fail to do the right thing sometimes because we lack moral courage. Ron Paul's failings go quite a bit further. He didn't tolerate the racist views in his newsletters merely because he didn't have the gumption to put a stop to it. He actively let it continue because the newsletters made money and because he was hoping to appeal to a paleocon constituency beyond his small libertarian base. That's pretty repellent.