This is what the IPMS has to say about this topic:
"The following may be entered in the competition or put on display but can be presented only behind opaque screens or similar visual barriers and only where visitors are provided with a fair description, in written format, of the contents of the models behind the screen. This screened presentation covers competitors and the general public, but no person younger than 18 will be admitted except in the presence of an adult responsible for the young person, subject to the provisions of governing local law:"
"Models or dioramas of historic events (e.g., general dioramas or specific depictions of the result of the activities of the communist Cambodian Pol Pot regime, a Soviet Gulag, or a Nazi death camp) where the suffering of human beings, or the result of a pogrom, is depicted. Where the theme, content, or subject matter of presentations is graphic or would violate any provision of part A of this policy, the presentation is prohibited in any setting."
I am not a IPMS member myself, but I have attended many IPMS shows. While I can not speak for the IPMS, it has been my personal experience that dioramas which depict scenes of human suffering are generally frowned upon at IPMS shows. A friend of mine was scorned for displaying a diorama of a dramatic car crash. While no gore was involved, not even any blood, it still caused a lot of commotion.
If this diorama is not intended for competition at a IPMS event, then who cares what they think. This hobby should have the freedom to express one's emotions in the same way as any other artistic medium.