I understand the confusion. They're not saying the native Americans themselves are racist, but this depiction of them is. It probably should have read as "The old Game and Watch game Fire Attack saw a guy defending an old west fort against
stereotypical Native American guys trying to burn the fort down."
I'll try to connect some dots here, bear with me. Basically, it's a stereotypical portrayal of Native American people that essentially casts them as backwards primitive savages. The game doesn't have cutscenes or anything to say this explicitly, but the imagery and premise are deeply connected to those racist ideas.
As
Imran said in his post, the symbols and iconography of Native American peoples and their cultures are often taken out of context and used in tone deaf manners at best, and at worst are used to actively mock, demean, disparage, dehumanize, and oppress those same groups. It can look like those silly Halloween costumes, or Indian-themed casinos, or the sports teams Imran posted that have nothing to do with Native American people, but use caricatures/distortions of their symbols and icons to entertain and profit at their expense. Or it could be
the tasteless use/bastardization of a war cry. On top of that, it's important to consider the context and history behind those depictions, a history that includes widespread displacement and genocide. Native Americans were by and large not asked kindly to join the expansion efforts of white settlers. Instead they were used, abused, and bullied out of their land and homes, because white people then saw them as different, as lesser.
Distorted depictions of minorities affect how those minorities are seen and treated by the majority. "They look different, they act different; they aren't as smart, or advanced, or organized, or sophisticated. Their traditions and cultures are 'weird' and 'different'," etc. That's the kind of thinking that those stereotypes can reinforce. That's why those kinds of caricatures were and are harmful.
That's why that imagery is wildly inappropriate for this video game.