A full-scale model of a Lancaster bomber has already been built, as has a replica of the famous bouncing bomb. But producers of a remake of The Dam Busters have yet to resolve one question: what on earth are they to do about a dog called Nigger?

The anachronistically-named black Labrador was the faithful companion of RAF Wing Commander Guy Gibson, who led the British mission to destroy German dams in 1943. The dog is central to the plot: not only was he the mascot of Gibson's 617 Squadron, but after he was killed in a car accident, his name became a codeword for the bombers' prime target.

While the name was still acceptable when the original movie was made in 1954, that is no longer the case. So the film-makers, who include New Zealander Peter Jackson, director of the Lord Of The Rings trilogy, are faced with an unenviable choice: ditch historical accuracy or risk widespread offence.

Download the new Independent Premium app Sharing the full story, not just the headlines

The executive producer, Sir David Frost, asked the actor Stephen Fry, who is writing the script, to propose alternative names, but rejected his suggestions. Sir David declared last month: "Guy sometimes used to call his dog Nigsy, so I think that's what we will call it. Stephen has been coming up with other names, but this is the one I want."

This week, however, Jackson denied that a decision had been made. His assistant, Matthew Dravitzki, told New Zealand's Dominion Post: "To stay true to the story, you can't just change it [the name]. We have not made any decisions yet. The script is still being written, and that decision … will be made closer to the time."

Nigger featured in Paul Brickhill's 1951 book, The Dam Busters, which inspired the film. He also rated 12 mentions in the original movie.

Shooting of the £26m remake is expected to begin later this year, although the cast has yet to be revealed. Jackson, the producer, whetted appetites this week when he unveiled a Lancaster replica in Masterton, north of Wellington.

When the project was announced in 2006, Jackson acknowledged the canine-related difficulties. "It's a situation where you're damned if you do and damned if you don't," he said. "If you go one way, people are going to say we've sold out to political correctness. If you go the other way, you're obviously going to be inadvertently offending people. So it's a no-win scenario."

In 2001 ITV was criticised for editing out all mentions of Nigger's name when it screened the original film. Index on Censorship called the move "unnecessary and ridiculous", while viewers complained that key sections had been omitted. In the US, the film has been screened with the dialogue dubbed to rename the dog Trigger.

Jackson has said that he wants to be faithful to the book and 1954 film. His version, he pledged, would be "as authentic as possible and as close to the spirit of the original as possible".

The Dam Buster raid was one of the RAF's boldest wartime missions, and the remake – to be directed by New Zealand's Christian Rivers – will use details that were still classified in the 1950s. Shooting is expected to take place near Wellington and in Britain.