Ok, Ben Kingsley's being cast as the Mandarin. Not encouraging (fine actor though he is); casting a British actor of Indian descent in the role bodes ill to me. What really gets me is comments by creators that they wanted to avoid use of Mandarin because it's racist. Don't know if I buy that.
I'll grant you, as originally conceived, Mandarin was a derivative of the bigotry-fueled "yellow-peril" characters like Dr. Fu Manchu. That doesn't mean that he has to be interpreted in an offensive manner on-screen, or utterly divorced from his four-color origins.
Now, there's probably some concern about offending a large, valuable market of viewers. That's nothing new in the entertainment world: the 1939 film version of Beau Geste recast the sadistic Sergeant Lejaune as a Russian named "Markoff" to avoid offending French viewers. If handled correctly, however, Mandarin doesn't have to be insulting to the Chinese.
Mandarin can easily be interpreted as a would-be-world-conqueror who just happens to be Chinese. Like Dr. Doom, Mandarin's ambitions have always revolved more around his belief in his personal superiority than any racial superiority. The fact that he's descended from the aristocracy of a long-gone empire is nothing more than a handy hook that he hangs his personal ego on. In fact, Mandarin was usually shown as an outsider that vigorously disdained his native country and people, not a fascist promoter of his nation or race. It shouldn't be too difficult to write Mandarin as a powerful antagonist that intends to oppress all peoples (including his own) beneath an imperial regime under his absolute domination, "restoring" his twisted vision of a proper social order that never really existed. I don't see where that's any more offensive than trotting out the German Red Skull or the greedy American Obidiah Stane.