Turns out the actual quote from Nintendo was something far more inert: "At this time, there are no plans for this game to be released for any Nintendo platforms in North America." Which in industry speak simply means "wait and see."
GI.biz's follow up with Imagination's publisher, Alten8, reveals the game is in its "early stages" and wasn't blocked by Nintendo. A spokesperson for the Anti-Defamation League even said the group welcomed the use of new technology to educate. Although this isn't our favorite NYT error about gaming in recent memory, not channeling FOX News when writing headlines is always a good start.
Read -- NY Times: No game about Nazis for Nintendo
Read -- Alten8 disputes reports of Nintendo blocking DS release