I think the word racism should be used when something fits the definition of the word racism. That is, a belief that one race is inherently inferior biologically and/or physiologically to another race or races.
From Webster's dictionary...
Noun: 1. a belief that race is a fundamental determinant of human traits and capacities and that racial differences produce an inherent superiority of a particular race.
I don't find the lyrics of the Peter Pan song
"What Makes The Red Man Red" to be racist. Those lyrics are certainly unfashionable and insensitive, and I don't think a song like that should be used in a Disneyland ride (it's not). The lyrics also show a degree of prejudice, even though they are attempting to describe the shared humanity of far-off Indians with the 19th century British audience the Peter Pan book was written for.
But are the lyrics "racist"? They are if you now use the word racist to mean anything and everything applied to race or culture that is not fawning in its praise.
And I think it's a mistake to overuse a word like that, because it makes it harder to identify real racism when it happens.