That's all self-censoring. The law says use of such symbols is fine if it serves art², however the agency tasked with judging the youth impact of games does not think games are art. However, that's just their opinion and does not reflect actual legality, since this was never challenged in court.

So, until they change their opinion, or a game company decides it's worth it and takes them to court, game companies just end up censoring themselves in advance so they don't have to deal with it in the first place.

² As mentioned here https://news.ycombinator.com/item?id=9777854 , it was for example fine in the movie Iron Sky.

That doesn't make it any less silly.

I find the flying of the confederate flag in real life reprehensible, but censoring a civil war game using it as a symbol of the confederate armed forces? I'm not sure that makes sense.

Is there any evidence that censorship in Germany has really prevented racism?

Imagine if neo-nazis started adopting that made-up Wolfenstein logo as their own...