While I agree that the word has been misused by some bad actors in the "Woke 1.0 era", it's worth pointing out that this isn't what most people complaining about the word being "diluted" are referring to as these are mostly people flat-out upset by any suggestion that they themselves might hold racist beliefs.
That said, anyone using "racist" as a noun isn't worth your time, nor is anyone who's genuinely upset about people calling concepts, systems or ideologies "racist".
Specifically, the "Woke 1.0 era" culture war arose from two conflicting meanings of the word "racist" largely aligning with two different segments of the population: 1) "racist" as a bad word you call people who are extremely bigoted against people along racial lines and 2) "racist" as a descriptor for systems and ideologies downstream from racialization (i.e. labelling people as racialized - e.g. Black - or non-racialized - i.e. "white") as a mechanism of asserting a power structure. "Wokists" would often conflate the two by applying the word as broadly as the latter definition necessitates while still attempting to use it with the emotional weight and personal judgement of the former definition.
I think a lot of this can be blamed on "pop anti-racism" just as a lot of the earlier "boys are icky" nonsense can be blamed on pop feminism because fully adopting the latter definition requires a critique of systems, which is much more dangerous to anyone benefiting from those systems than merely naming and shaming individuals. Anti-racism (and feminism) ultimately necessitates challenging hierarchical power structures in general and thus necessarily leads to anti-capitalism (which isn't to say all anti-capitalists are anti-racist and feminist - there are plenty of "anti-capitalist" movements that still suffer from racism and sexism just as there are "anti-racists" who hold sexist views or "feminists" who hold racist views). But you can't use that to sell DEI seminars to corporations and corporations can't use that to promote themselves as "woke" - as some companies like Basecamp found out when their internal DEI groups suddenly started taking themselves seriously during the BLM protests, resulting in layoffs and "no politics" policies and a general rightwards shift among corporate America leading up to and into the second Trump presidency (which reinforced this shift, resulting in the current state of most US corporations and their subsidiaries having significantly cut down on their previously omnipresent shallow "virtue signalling").