Its easy to say diversity breeds intolerance but I think there's more to it than that. I think that intolerance is rooted in old ideas that are passed down from generation to generation, cultural stereotypes that develop out of differeing economic and social standings between different races, and finally a general fear or dislike of the unfamiliar.
It is relatively easy to say that only way to root out intolerance is to completely eliminate diversity, but that's impossible in our world and will be for a long time. But in the current world there are plenty of people who are tolerant. I think that to actually become tolerant one HAS to live in a diverse area and actually meet people from varying races. Without that experience I think everyone would be a little bit racist.
However, what can make one man tolerant and his next door neighbor racist is often beyond me. You'd think they would share a similar outlook but where you live only plays a small part. Feels on race probably come from a combination of upbringing, societal influences, and real world experiences that correspond to the other two things.