Ever since I stumbled upon this thread a few weeks ago I've been thinking about a proper contribution to this sensitive topic.
First my personal view about whether or not one should add the swastika to a model of the Bismarck:
For the model to be historically accurate I think the swastikas should be added.
Just be careful when showing it to other people, especially in Europe. Why? Because a lot of people just don't understand why you would even bother to put a lot of time and effort into building this model if you don't have some affiliation with Nazi Germany in the first place. I know, not very reasonable but that's just the way it is. If you however explain to them that your interest is purely technical/historical and that your model has nothing to do with glorifying Nazism, I'm sure most people will try to understand. Still, for most Europeans, especially those living in the countries occupied by Germany or its allies, it's difficult to make that distinction.
While reading the other responses in this thread and the other one titled "I need to apologize" I couldn't help but notice that most of them were from the United States and included statements like Political Correctness, History is History, Sensitivity of thin skinned people etc etc. Apparently the people who made these statements have a hard time understanding why the use of the swastika is prohibited in Germany and other parts of Europe. They probably see it as some kind of censoring or denial of history. That is not true.
Showing the swastika and other Nazi symbolism in film, photographs, books, memorabilia etc in its historical context isn't prohibited at all. On the contrary, the German people are very well aware of their history because of this and they should be admired for not trying to hide from it (unlike the Japanese).
However, it is the manufacturing of new products (including scale models) displaying these symbols which is prohibited (accept for educational purposes). Please remember, these laws are not new but were introduced right after the end of the war as part of the denazification process.
And there is a very good reason for this: contrary to what you might think Nazism or German nationalism is not merely history, it's living history.
After the German troops surrendered in May 1945 the Allies were faced with a huge problem: an enormous country, completely in ruins, economically wrecked, full of disillusioned soldiers and civilians whom had been indoctrinated for so many years. Once again the rise of the Great German Nation had been halted. Once again they were defeated. Once again there rightful place among nations was withheld from them. It's true, not all Germans were Nazi's, but still, many of those felt the same way nonetheless.
You would however be astonished if you knew how many fairly high ranking Nazi's quickly regained their former influential spots in German and Austrian society. This is probably due to the scale of the atrocities committed and the huge amount of people involved. The little fish mostly got away as all attention was directed to the big ones. Furthermore, both sides were tired of war and wanted to move on as quickly as possible.
"Murderers among us" by Simon Wiesenthal is a good read about this subject.
It's primarily this group of people for which the strict anti-Nazi laws were (and are) intended. To prevent them from using the familiar old symbols (which a lot of Germans, Nazi or not, still associated with the prosperous pre war era) to gain political support and thus endangering the future of the new democratic Germany the Allies had in mind.
It's this preoccupation with nationalism which is one of the reasons why the German people became Europe's "problem child" in the first place. Like many events in history its roots can be traced way back. In the case of Germany all the way back to Napoleon. Until its dissolvement in 1806 the German people were all part of the Holy Roman Empire. In 1815 the German Confederation was formed. Although language and culture were roughly similar the federation consisted of approximately forty separate states. Among these Prussia and Austria were the biggest, both trying to increase their influence. The Kingdom of Prussia was however the leading military and industrial power. An early attempt to unify all German States under leadership of Prussia in 1848 failed.
Otto von Bismarck (after whom the battleship was named) became prime-minister of Prussia in 1862. It was he who introduced nationalism as a means to achieve his goals. First Prussia, together with Austria, declared war on Denmark to liberate the German people in the Danish provinces of Schleswig and Holstein. Doing so was a great way to make the German people aware of their common identity and at the same time prepared the Prussian army for things to come.
Then, in 1866 Prussia declared war on Austria as a way of eliminating Austria's influence in the confederation. Austria was defeated and Prussia annexed four Austrian States. The North German Confederation was formed which included all the former states except Austria and a few southern states.
In 1870 Bismarck tricked France in to declaring war on Prussia. As the French army marched to Berlin the southern states were forced to turn to Prussia for help. Together they defeated the French at Sedan ending the Second French Empire. In 1871, while Paris was under siege, the King of Prussia was proclaimed German Emperor (not Emperor of Germany!) and the German Empire was born.
Under the ambitious Emperor Wilhelm I and the even more ambitious Emperor Wilhelm II German nationalism reached its peak. By using propaganda the German people were led to believe they had to conquer their rightful leading role in world politics. However, while other nations had already successfully secured their role, Germany found itself land-locked between well established borders: Holland and Belgium in the west, France in the south-west, Austria-Hungary in the south-east, Russia in the east and Denmark in the north.
Furthermore, none of Germany's states had a seafaring tradition which as a result left them without any overseas colonies. Although they eventually acquired some scraps of territory in Africa they were not able to secure the profit-making colonies to which other nations had access.
They were too late, the world was already divided! Wilhelm II's erratic diplomacy and huge navy program were amongst the reasons which eventually lead to World War I, a war which, as you know, ended disastrous for Germany. "Dreadnought" by Robert K. Massie covers this topic brilliantly!
The economic malaise Germany found itself in, especially after 1929, paved the way for Hitler and the NSDAP. After he came to power he used the same tactics as Bismarck to appeal on the German sense of nationalism to reach his goals. First he convinced the German people Germany wasn't complete until every German was able to live in Germany (Heim Ins Reich), which led to the annexation of Rhineland, Austria, Sudetenland and Memelland. All of this by using diplomacy alone (and a little threatening with war). Then he united the Germans by providing them with a common enemy: Jews and other undesirables, they were the cause of Germany's defeat in 1918! Finally Prussia's former possessions in the east (Poland) were to be brought back under Germany's influence in order to create room to expand (Lebensraum). The rest is history....
A lot of people then stood behind their Fuehrer, as of today some of them still do, I've met one of them, it's shocking!