What do you do when people spout racist drivel?

[heiditandy]

In perfect synchronicity with the Main List discussion of the
correlation between racist words and being evil, I found today's Carolyn
Hax column in the Washington Post
(http://www.washingtonpost.com/wp-dyn/articles/A26878-2003Feb4.html) to
be particularly interesting and somewhat on topic there, but I have a
feeling it would fall off topic very quickly, so while I'll give the
link there, I'm also putting it up for discussion here: 

Dear Carolyn: 
Do you have any advice for how to handle situations in which people,
whether it be relatives, friends, acquaintances, co-workers, service
providers, whoever, make hateful comments or jokes that are
anti-Semitic, anti-black, anti-gay, anti-Hispanic, you name it? I am way
too old not to know how to handle these situations. I don't encourage
the remarks in any way, but I don't condemn them either. I usually just
stand there looking like an idiot and try to change the subject. 

Here's part of her answer:

When circumstances demand a sleek, non-humiliating reproach -- say, when
the hateful egg-layer is your new client, out to dinner with you and
your boss -- the two can be a formidable and eloquent pair. "[Pause.]
Well. About those Mets." No huffs, no puffs, no conceivable doubt where
you stand.

Nevertheless, I think the Vocal and Righteous Objection is almost
universally seen as a virtue -- despite the fact that few of us ever
manage to rip one off under pressure.
***********************************************************

So the question is, just how bad is it to take the subject-changing
approach, versus the Vocal and Righteous Objection? And can that
"badness level" change in different circumstances?

heidi