I want to say that you guys made my week by reading my abrasive, overly sarcastic email concerning Sam's take on why Costello had to be racist.
To answer Sam's question about what this added to the character or movie, I'll add: Race is and has always been something that hangs over the heads of all of us in Boston. It not only has a racist reputation, but the men and women of Southie had a very explosive relationship with the black community here for a number of reasons. One being that Dorchester was traditionally both a white and a black ghetto-- with the Irish on one side and the black community on the other. The other racial tensions come from the busing issue-- in 1974 when forced busing was passed as a law to intergrate Boston public schools. Much of the Irish community in Southie was very, very against this and violence broke out in some instances. So, for me, Costello's attitude toward race at the begining of the film makes perfect sense.