Pepe is just a cartoon character, you're not supposed to take him seriously. Besides, even then, there are other Looney Tunes characters that cause just as much, if not, more controversy: Porky Pig fat shames and shames stuttering, Elmer and Daffy shame speech impediments, Lola is overly sexualized for a kids' show character, and Speddy Gonzales is overly a stereotype.

You could make Pepe get him comeuppance in the movie by having Penelope stand up to him, but no, you're getting rid of that opportunity to show kids right from wrong.