Where I agree with others is that it is not a funny joke (it's also decades old, btw). But to call it racist and offensive is just silly. Muslims are a faith, not a race - as has already been said. Prejudice? Grow up, please.
Some people just want to be offended. They're primed to be so.
If more people laughed at terrorists (who, let's be honest, are often pretty stupid or brainwashed people) then maybe it would be less attractive to become one.
And the more we take the piss out of a religion, any religion, the better imho.