People don't think it's acceptable, which is why he was constantly being banned from online forums. People think it's understandable because it's a function of illness, not a core part of his personality.
Please don't lump all mental health "issues" together as you have here. Schizophrenia is quite different to something like depression. Psychosis does not "remove the filter" or "reveal the true identity".
Terry was an ill person who was failed by society -- he didn't get the treatment he needed. We don't need to add to that by blaming him for things caused by his illness.
But FWIW, if someone thinks racist things but never speaks nor acts upon them, I'm not sure what it means to "accept" that or not; and I'm not sure how we could possibly know if they only came out because of schizophrenia or if schizophrenia triggered them in the first place. It all just seems to be kind of moot.
Read that, and try to understand why it is tasteless.
We'll he's dead now. You don't have to worry about hell banning him anymore so you can feel good about yourself.