You're right. The main point here is not the "racism" in baseball, but the contraction issue.
What is most appalling now from Generalissimo Selig is the planned destruction of the Twins, one of the original American League teams (the original Washington Senators).
Why?
Was it because the Twins are a poor draw? No, they can draw over 3 million fans when they have a winning year.
Was it because the Twins are a bad team? Teams go bad, but get better, usually when some change in management is made. No, this isn't the reason, either.
Why contract them, then? As you pointed out, the good people of Minnesota who forked over megabucks not many years ago to build the Hubert H. Humphrey Homerdome are balking at building yet another -- unneeded -- stadium. Since they didn't go along with the extortion they'll now be made to pay for it with the possible cancelling of their team out of existence.
This is the lesson to all other teams: Your team won't move to another city anymore. It'll just be deleted from the league! Don't think that it can't happen to your city.
As for tradition, the Twins being the original Senators and all, well, Selig hates tradition almost as much as he hates baseball, which is rather quite a lot.