On the whole the mysteries from the earlier stories were more interesting but I liked the Watson and Holmes dynamic more in the later stories.
Vol II is probably about equal with Vol I in terms of racism. It has less use of the slur g***y, but 3GAB does have the n-word in it.
If I were to reread the Sherlock Holmes canon I wouldn't do it in order. I'd just pick a story and start reading. It doesn't really make a difference what order you read them in. I mean, the first time around you should probably read The Final Problem before you read The Adventure of the Empty House but other than that start where you want.