Politically dominant Malays want the singer, a 24-year-old Malaysian Chinese student living in Taiwan, to be jailed or even stripped of his citizenship for the controversial video, which they say insulted the Malays and Islam.
Chinese say the singer, whose lyrics implied Malays were laid-back and Chinese worked hard, was merely restating a fact.
As Malaysia marks 50 years of independence from British rule this week, the nation remains a split personality -- exposing worrisome racial and religious divides, and stoking fears of more tension ahead of an anticipated early general election.
There are still three separate stripes of Malaysians -- Malays, Chinese and Indians -- and racial tensions rumble under the fun-loving surface of this relatively prosperous developing nation.
"It's becoming increasingly difficult for the people of various ethnic groups to participate in a common activity," said prominent historian Khoo Kay Kim.
"It covers every aspect of life now, even sports. It never used to be so sharp."
Race and religion are touchy issues in multi-racial Malaysia, where Malay Muslims form about 60 percent of a population of roughly 26 million. Hindus, Buddhists and Christians dominate among the Indian and Chinese minorities.
Many non-Muslims are also upset the authorities and the courts are allowing their rights, including freedom of religion, to be trampled by the Muslim majority.
MALAYSIA TRULY ASIA?
Dubbed the "melting pot" of Asia for its potpourri of cultures, Malaysia has long been held up as a model of peaceful co-existence among its races and religions.
That may no longer hold true.
"Views of increasing intolerance and religious polarisation have negatively impacted how Malaysia has been perceived," said Bridget Welsh, a political scientist at John Hopkins University.
"Malaysia has benefited from a largesse of resources, which, if depleted, will lead to greater racial tensions," said Welsh, a specialist on Malaysia.
Malaysia's economy, which relied heavily on rubber and tin during British colonial rule, has since been transformed into one based on manufacturing and services, and is now the region's biggest after Indonesia and Singapore.
But while it has made progress on the economic front, race and inter-faith relations are lagging and efforts to mesh the races into a single Malaysian identity are far from reality.
The reasons for that are deep-rooted.
Malaysia's political, education and economic structures, as well as faith, continue to be entrenched along racial lines.
Malaysia has been ruled since independence in 1957 by the Barisan Nasional, a coalition of 14 race-based parties.
An affirmative action plan, the New Economic Policy (NEP), which favours the economically backward Malays and introduced following bloody race riots in 1969, remains in place despite long-standing resentment from non-Malays.
The education system remains fragmented. Chinese parents prefer to send their children to Chinese schools, rather than the mainstream "national" schools to which Malays go.
The polarisation continues into universities and even in the workplace, where the different races hardly mix with one another.
A recent survey on race relations found that 34 percent of those polled had never had a meal with citizens of other races.
Much of the blame lies with the political system.
"The powers that be in Malaysia survive on the paradox of keeping inter-ethnic peace and being champions of their race at one and the same time," said Ooi Kee Beng, an analyst at the Institute of Southeast Asian Studies in Singapore.
"It is that balance that they keep, and in the process, Malaysia does not develop where racial integration and understanding are concerned," he said.
Malaysian Prime Minister Abdullah Ahmad Badawi, widely expected to call a general election within months, tried to soothe the growing resentment among non-Malays when he promised last week that he would be fair to all races.
"I have been fair. I want to be fair and I will always be fair, that's my promise," he told a meeting of the Malaysian Chinese Association, the nation's second biggest political party.
But his critics are not impressed.
"Abdullah will only convince Malaysians that his policies will be fair and equitable to all communities by ending the NEP and open up government procurement to all Malaysian contractors," said opposition politician Lim Guan Eng.
Not surprisingly, Internet chatrooms are abuzz with racially charged debate following the YouTube posting.
"Why, after 50 years of independence are there still these old arguments between Malaysians?" one wrote.
"Why do some Malaysians still remain so immature, using the same old stuff, bashing each other?"