Critical to understanding this incident... [is that] for many Brits, the Nazis have long been good for a laugh. Harry is not, by most accounts, much of an intellectual, so to claim that his brown-shirted burlesque was somehow a deliberate Producers-style satire is a stretch too far. At the same time, his dreadful choice of costume, however dimly, however unconsciously, reflected a national fondness for making a mockery of the pretensions of the Third Reich. On occasion this can be tasteless, but ridicule is not a bad way to strip the swastika of some of its malign power. The failure of neo-fascists ever to make much progress in the U.K. (unlike in some other European countries) can at least partly be put down to the fact that voters have been too busy laughing to take them very seriously.You need look no further than Basil Fawlty's ridiculous goose-step in Fawlty Towers. Just don't mention the War! And if this doesn't totally explain Harry's action, perhaps it goes some way to explaining British reaction.
UPDATE: DovBear helps the Fawlty Towers impaired.