Here's the thing, though: If you're going to say that he's a great writer and thus a good model for the award, at some point you're going to have to face the fact that in his writing, non-white skin is a pretty reliable code for "villain", and being lily-white and "of good stock" is just as reliably "protagonist".
You're going to have to deal with him describing characters as "mixed-blooded and mentally aberrant" as a way to villainize them.
You're going to have to deal with the fact that he described a (dead) black character as " a loathsome, gorilla-like thing, with abnormally long arms that I could not help calling fore legs, and a face that conjured up thoughts of unspeakable Congo secrets and tom-tom poundings under an eerie moon."
You're going to have to deal with the fact that the final Shocking Twist in "Medusa's Coil" is that the villain has African ancestry.
You're going to have to deal with the fact that one of his protagonists had a cat named N***er-Man.
You're going to have to face the fact that this is the man who wrote and released "New England Fallen" and "On The Creation Of N***ers".
You're going to have to deal with the fact that you're comfortable calling that timeless.
And, most importantly, you're going to have to deal with the fact that making the man who wrote all of that the face of one of the most prestigious awards in genre - signalling that the organization sees his writing as laudable and worthy of commemoration - hurts authors of colour,
As for the "work of a young Jewish woman?" Several of the works I reference above were written during and after their relationship. They were divorced in 1929. He wrote approvingly of the Nazis, chiding them only for being too focused on biological arguments instead of on the obliteration of "lesser" culture - the "kinder, gentler" Lovecraft was of the opinion that Jews were acceptable, maybe, if they weren't too dark skinned or attached to any shred of their culture whatsoever. I suppose that's an improvement over comparing black people to animals, but not much.
So yeah. he was racist. Exceptionally racist, even by the standards of his time. And he never, from what I can find, really stopped. And it's all through his work. And busts of him are being given to the people he targeted as a way of rewarding them for doing good work.
This isn't just a bunch of uppity minorities tearing down the white guy because he's not a perfectly sparkly saint.