I found this article from my hopefully soon to be country-of-residence kind of interesting: http://www.smh.com.au/news/0203/20/national/national18.html
Personally, I think this never would have happened in the U.S. The n-word is way too verboten. I don't agree with the idea of completely eliminating the word from the language by banning books which contain it. One of my most favorite, influential novels contains it: The Enormous Room, by e e cummings. However, I disagree that it's "not necessarily racist." It has so many roots in racism, that I find it hard to disentangle it from racial issues altogether.
The sign in question, which contains the inflammatory N-word (for those who don't want to read the whole article), contains the nickname of a certain rugby player, who was quite caucasian-looking, but happened to use a certain brand of shoe polish called "Nigger Brown." The thing is, while the sign isn't there to be racist, the name of the shoe polish has undeniable racist connotations. Right there, deep roots in racism, even though the moniker wasn't intended as a racist one.
I think that the fair thing to do here, would just be to replace the sign with the rugby player's given names instead of a nickname. Odd that that wasn't a satisfactory compromise.