You say: "let the bad taste humor about WW2 events be", I say not, not in this case. None of the citizens of your country died in such a German Nazi death camp. While I am a high-ranked medal hunter I simply refuse to earn even a single medal from this game for the sake of respect for the 1,1 million Jews and nearly 200 000 Poles murdered there. Ask these nations if they find it funny. It is even possible that a grandson or a great-granddaughter of an Auschwitz survivor will find this game. What would you have to say to them?
You say about the "8bit gruesome imagery". Have you even ever been to Auschwitz-Birkenau? This is the full name by the way. If you would and if you would see the real photos of the dead prisoners of this camp you would redefine your definition of a "gruesome image". I cannot link them here for obvious reasons.
Summarizing: there are and always should be limits to what can be used for "entertainment purposes". The problem is that people not knowing much about these times often forgot about it, showing an absolute lack of empathy, not even saying about sensitivity.