NSW Cup player Kepaoa received a six-game ban after pleading guilty to contrary conduct at the NSW Rugby League judiciary on Wednesday night.
Kepaoa apologised during the hearing, and the Knights have accepted his sanction.
"Everyone knows it's not right, and he's paid a heavy price for that, personally and as a club," Knights coach Holbrook said.
Kepaoa's slur led him to be sent off during Friday's reserve grade defeat of St George Illawarra, and made him the first NRL-listed player suspended for a homophobic slur since 2022.
The incident came just weeks after former prop Kane Evans became the NRL's second male player to come out as gay, and first since Ian Roberts in the 1990s.
In an interview with the Nine Network, Evans said he dealt with addiction, suicidal ideation and homelessness while grappling with his sexuality.
The Knights said in a media statement they would continue to educate Kepaoa "around the impact of language and the responsibilities that come with representing the Newcastle Knights and the values we stand for".
"We do a lot of education in those areas but what happened was not right and (Kepaoa) has accepted responsibility and the outcome of it," Holbrook said on Thursday.
"We've got to move on and learn from it."
Kepaoa is unavailable for NRL or NSW Cup selection until round 23, though has not featured at first-grade level since joining the Knights from Penrith this year.
The 26-year-old has played 43 NRL games to date, all for Wests Tigers between 2020 and 2024.
Kepaoa's most recent NRL appearance was in May 2024, but he has played 12 of a possible 14 games for the Knights' NSW Cup team this year.
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