The artist who created Pepe had nothing to do with the alt-right, it's an internet meme they took by sheer volume, just by using it a lot. Pepe has been around for 10 years, and the use of it as a symbol of white supremacy is 2-3 years old. The artist recently got put on a web page by the Anti Defamation League on a post categorizing Pepe as a hate symbol, next to the Nazi Swastika. The artist called them to try and get it reconsidered and have his name removed, since he had nothing to do with current usage of Pepe. He's now trying to #savepepe.
The current usage of Pepe by the so-called alt-right has sadly but definitely been intended as a symbol of hatred and racism, but I wouldn't assume the discrepancy between what Pepe looks like and what hate groups use it for implies anything about how and why Twitter is blocking these people.