Most commonly used for paint or to colour bricks, yes. It's disgusting, but the British and Italians didn't really care at that point because anthropology and archaeology were not respected professions in the 1820s. They were just hobbies of wealthy gentlemen who liked to travel.

Most disturbing is that apparently people kept using them for paint up until the last supplier ran out of mummies sometime around 1960. Yes. 1960.