You can acknowledge that he was racist and still appreciate his work/reference him.

Separating the art from the artist doesn't make you complicit in their shitty opinions; there's still a lot to get out of Lovecraft's stories, he's one of the core pillars of modern horror after all, his influence is inescapable. You could argue it's a different story when it comes to living artists/celebrities, since you are in some way contributing to their success, but Lovecraft is long dead, his work is literally so old it's public domain lol, you're good.

I've personally been reading many of his stories lately for inspiration, and it's been very enriching. You have to keep an eye on the racist overtones of some of them, but as long as you do I don't see the issue.

I don't remember that part where I endorsed his bigotry. Lovecraft was a deeply troubled and problematic man, but he's long dead.

I was about to make a joke about him being racist too. Want his car named N-word baby? The question is, does his art perpetuate the racism?

You're not incorrect, and even "he was a product of his time" isn't an excuse: when he was alive, even other racists thought that Lovecraft was a bit too racist.

However, at the same time - you have to look at what impact reading his work has.

He's dead. He doesn't get money from it. The works are public domain. His estate doesn't get money from it. Further, the language used is striking, influencing a century of other work.

Does that language come from a place of racism? Yes. But it the work itself isn't overly racist - or at least, it doesn't make it more racist than Sherlock Holmes. Conan Doyle's The Sign of the Four is used in college classes today to teach Orientalism, yet largely people accept such a thing as okay because it doesn't radicalize new people into the subject.

If you reject every artistic work because the creators had questionable views, then you begin forcing yourself into strange choices. If the artist doesn't gain benefit from you reading it - then logically, it doesn't matter if you read something they made or not (contrast this to Harry Potter, where consuming said media gives money to a TERF). When the artist is out of the picture, the only thing that matters is what the work means to you.

You have the right to say "the work is abhorrent because of XYZ", but said things should be things you can point to within the work itself. If the artist isn't gaining benefit and their views aren't the focus of the work - why does it matter?

He can't directly benefit from the use of his works because he's dead, and even if that weren't the case, its in the public domain. That's the difference to, say, JK Rowling.