It's one of those scenes which is seared into my brain. I remember watching it as a youngish teenager, assuming it was just a musical set at some point in time in Germany. When it moved explicitly into "rise of the Nazis" territory with that scene I was shocked that a musical was allowed to do that.
To my naive mind, it was as if Mary Poppins had featured a bit where Mrs Banks is trampled to death by the king's racehorse.