I have to admit that my knowledge of Westerns doesn't stretch much beyond once having seen part of a Winnetou film and Der Schuh des Manitu, the Winnetou parody. And of course, Lucky Luke. Your example sounds interesting, though.

There's no reason this couldn't be a really fun genre, and yet it's mostly just a vortex of racist, poorly-researched suck.

I think that's mostly due to a certain ... nostalgia? I don't really understand it, since looking back with nostalgia to that period just isn't done very often in Germany, what with it leading directly to WWI, which led to WWII, etc. I don't even remember seeing (German) media set during that period, except for the occasional biopic focussing on exceptional women that my mother likes to watch. Maybe I'm just missing something.

Nostalgia generally has the effect of glossing over anything that wasn't great during a certain period (like ... a World War or the Stasi, in the rare German cases I know). And of course the historical group you identify with – whites, upper class people, etc. – never did anything wrong/questionable. Maybe steampunk would be less problematic if it wasn't produced by nostalgic people. But I don't think that's ever going to happen.