No, I think we very well can do that. Not being a fan of Nazism is perfectly fine and acceptable, acting like it never happened is deplorable, not to mention the fact that it's beyond ridiculous that you can make a game specifically about World War II, with Adolf Hitler as the leader of Germany, and that's okay, but the instant you put a swastika in there, that's the problem. As if the swastika is what makes the whole thing so offensive. It's part of history. It's not something you sweep under the rug and ignore. Also, comparing the symbolism of the swastika to bad language and nudity is just plain strange.What kind of censorship is perfectly normal and acceptable varies very much on your social and political viewpoints, so don't judge the Germans too harshly for not wanting that kind of symbolism around.
On topic, I would love a German flag like either the one above, since it's more historically accurate - the one we have now is the old monarchist flag if I'm remembering right, which is just kind of weird, honestly. Most games I've seen, like Panzer Corps, use a blood-red flag with an Iron Cross in the middle which is also good and historically accurate and certainly shouldn't offend. It would also make Germany easier to distinguish - the current German flag is kind of similar to some of the others in use, but that would definitely make it unique.