Caymen--Claiming that the "leprechaun" isn't offensive because it isn't real doesn't cut it, for a number of reasons. First, the team is not called the "Notre Dame Leprechauns" or the "Notre Dame Fighting Leprechauns". They're called the "Fighting Irish", and as such, their mascot is a representation of the Irish, not of leprechauns. Secondly, their mascot takes on traits that aren't typically associated with leprechauns, but are stereotypically associated with the Irish heritage--namely, a fighting/combative demeanor, and drunkeness (via the red nose). Clearly, this mascot isn't intended as a leprechaun, but as a stereotypical/racist representation of the Irish people. Whether the mascot is real or not is irrelevant--after all, the former Atlanta Braves mascot, Chief Nockahoma (probably misspelled), wasn't real--but clearly that was offensive to many American Indians (and others who saw the racism for what it was), and rightly so.
Just curious--you claim that you would not be offended "if there was a mascot that was German and was called a Kraut." Would you still not be offended if that mascot dressed in stormtrooper garb, wore a swastika on his arm, and had a Hitler haircut/mustache? Because that is how the Notre Dame mascot comes across to many Irish people, including myself. (My last name doesn't indicate it, but nearly half of my ancestry.)
One last thing--Caymen, Josey, and Nelson, as a full-blooded Native American, I don't care for your usage of the term "Native American" to refer to American Indians. It implies that I and other people who are native to this country (and, for that matter, to this hemisphere) are not Native American, unless we happen to have American Indian ancestry, and that is not the case. Feel free to call them American Indians, Tribal Americans, specific tribe names, or any other phrase that accurately describes that group--and only that group. But "Native American" doesn't work.