So here's the thing, is that joke making fun of a Chinese restaurant, or is it making fun of racist americans who make comments like that?

The reality is most Americans have someone like that in their family. Read the rest of the scene: Leonard is distinctly uncomfortable, tries to politely correct the wordage, the comment is lost and the originator moves on.

In any case, are you saying that... words that offend you should be removed from media? You know, like... some kind of... woke person who is really sensitive to racism?