Camarath said:
Personally I am not sure what alignment the Nazis would have been since apparently genocide is not an evil act in D&D. After all I don't know how many time my player have one invaded a foreign land, two annihilated it inhabitants including defenseless women and children, and three stolen every thing they could carry.

Well, if you're all having fun... but by the end of your post it sounds like you aren't.
But in D&D just because someone is evil people assume it is good to do evil things them.
Killing is not evil. Killing
the innocent is evil. Killing for fun or profit or out of duty to an evil master is evil.
Gary himself on these very boards (April 23, 2003) said,
As far as I am concerned the FRPG is a heroic game form, and thus the base assumption is that the players will be of non-vile stamp. If the GM desires the exploration of malign behavior in the campaign there is no need for printed guidelines in the game.
As you note, the combat with and slaying of creatures is considered by many a bad thing, even when it is a case of good fighting evil. While I don't agree with them, I do think it is unwise to add more ammunition for critics to use against the RPG by including the vile in printed material.
While he is no longer involved with the game, his stance can be seen reflected in both the PH alignments and the MM behaviors.
The "paladin in Nazi Germany" argument, for those lucky enough to either block it from their memory or never encounter it, is simple: Hitler passed a law requiring that all Jews must be killed. When a paladin visits and encounters innocent Jews, does she...
A) Kill them
B) Spare them
A violates Good, making it an Evil act.
B violated the laws of the land, making it a Chaotic act.
So any paladin entering Nazi Germany was unable to take any actions, including non-action, without violating her code or alignment.
Now in 3.x, lawful no longer requires obedience to the laws. At all. EVAR.