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There is no either/or, here. People are perfectly capable of understanding that "that's just the way it was back then" and being appalled by the sexism/racism encountered in older works of fiction all at the same time (though as others have pointed out - there was no time in history when sexism and/or racism was entirely unopposed by people of conscience).
For myself, it all boils down to how said -ism manifests as to whether or not it will trip me up (or even cause me to abandon a work). Any work of fiction that glorifies it (or attempts to justify it) is right out--I don't care when it was written. Everything else is negotiable (in historical fiction). I have no problem, for instance, with it being used as a mechanism for conflict, or for vilification (depending on how graphic/gratuitous), but if overplayed, I'm liable to give it a pass and move on.
Historical or not, I've better things to do with my time than to read someone's fictional work populated by a cast of characters who represent ONLY the lowest common denominator of the period.
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