I'm not sure you can call him a racist. He has an unintrospectable (by us at least) mental state, and the things he says can't be taken as representations of his opinions. He literally can't either control what he's saying, or perceive reality clear enough to get a usable picture of it.
To be racist, I think it should be clear that the person is making value judgments about others based solely or primarily on the target's race. Nobody knows what Terry is thinking.
Either way, please don't hold it against him for prolific use of the n-word and other slurs. Isn't it obvious he has no clue what he's saying? He lives in a world where everyone is a potential attacker/saboteur.