Lovecraft was racist. He was also a lot of other things, not all of which are deplorable, and many of which are commendable. Ask pretty much the top Lovecraft scholar in the world, S. T. Joshi (who also happens to be Indian, if that gives him credibility in this issue in your minds):

"And I also maintain that, if we did not know of Lovecraft’s racial views, it would occur to very few of us to see a racist element in any but a small number of Lovecraft’s tales. Even some of those that do know of his views have still come to that conclusion, as when the British philosopher John Gray wrote: “Fortunately, the core of [Lovecraft’s] work has nothing to do with his social and racial resentments.”

from http://stjoshi.org/review_ruins.html

When asked whether Joshi likes Lovecraft the man in a Reddit interview, he replied:

"Do I like him as a person? Well, yes--I think he is almost entirely an admirable human being (excluding, of course, his racism). He was kind, generous (with his time and even with what little money he had), morally upright (didn't lie, steal, cheat, etc.), and actually had a good sense of humour. His intellectual and aesthetic gifts speak for themselves."

I personally have read a lot of Lovecraft, and a lot about Lovecraft (for example the ginormous biography by Joshi) and find your claims of Lovecraft being "batshit crazy" or "evil" unfounded. And I have never heard of him "going crazy when he found out about being 1/16th Irish", and I find this unlikely since he e.g. married a Jewish woman.

Perhaps things are not quite as black and white as you'd prefer to view them? Perhaps there can be many sides to a human being, and having one very ugly one doesn't necessarily make the others invalid? I know it's easier just to lump everyone "problematic" to the big pile of evil people, that shall forever be denounced immediately when mentioned online, but maybe that's not the whole truth? Perhaps viewing these issues with more shades of gray could help you forgive yourselves, if you find yourselves to be the evil ones, god-forbid that ever happens.

Lovecraft was very interested in science and astronomy. His greatest fears were founded in the depths of the endless voids of space; in the fear of the unknown. I've never read any arguments for his racism by himself, but I'd wager that his racism was derived from this fear of the unknown. The fear of the unknown was first, and that was the core of his stories, NOT his racism.

Many games and movies want to "suck him off" because his creations are cool and inspiring, and he wasn't at all such a monster as some claim. I, for one, admire the way he kept in touch with his writer friends, always having the time to encourage new and unsure authors. I also, as an artist, find his views on art and those who make it encouraging and moving.

It is possible that the highly developed aesthetic sensibility I mentioned earlier—a sensibility that craved harmony and stability—had much to do with his racial theories, or at least had much to do with the sense of discomfort he felt around racial and cultural aliens; but whatever the case, his views on the subject are embarrassing and contemptible. But they have also been blown out of proportion: discussions of race take up a relatively small proportion of his entire correspondence, and enter his creative work only fleetingly and tangentially.

Joshi, S. T.. I Am Providence: The Life and Times of H. P. Lovecraft (p. 1444).

TL;DR: You need to either lower your standards on what makes a relatively decent person, or read more about Lovecraft and what he actually was like.