I think a couple of things have been missed in this thread.
First, Barenboim's decision to play Wagner was not an arrangement of any kind with the concert organizers - as he noted in his Reith Lectures on the BBC, it was an unscheduled encore and he asked the audience if it was okay to play Wagner, and some left. That is fine, and Barenboim himself echoed many of the same sentiments expressed on this thread - namely, that Wagner's music is so closely tied to the Holocaust because of when it was played, and Barenboim fully agrees with the idea that Holocaust survivors should not be subjected to listening to Wagner if it is associated with the Holocaust; Barenboim goes as far to say that they should not have to listen to any music that reminds them of the genocide.
Which is partially why I think the unofficial Wagner ban may seem problematic at first - Wagner was far, far from the only composer to be employed by the Nazis. Yes, Bayreuth was transformed into a Nazi festival during Hitler's rule, and Hitler was close with Winifred Wagner; however, not the Ring, nor Parsifal, nor Tristan was Hitler's favorite piece of music - Beethoven's Ninth was, even though Beethoven wrote it to be an expression of brotherhood and joy, as when the tenor exclaims in the fourth movement:
O Freunde, nicht diese TÃ¶ne!
Sondern laÃŸt uns angenehmere
anstimmen und freudenvollere.
Similarly, Wagner was far from the only composer whose music was played in concentration camps or during the grotesque Nazi experimentations - other favorites included Bach, among others. As far as I know, there is no unspoken ban on Bach or Beethoven because of their association with the Nazis (Hitler chose to have Beethoven's Ninth performed for his birthday in 1942). Part of this is because of the function of music in German life in the early and middle parts of the 20th century - while most Americans now watch reality television or whatever (how many? 36 million? watched the American Idol finale), far more common in Germany (and other European countries) was the amateur production of chamber music by family musicians (which is why so much of Brahms' output is scored for odd arrangements of instruments). There is a reason that Adorno wrote that "there can be no poetry after Auschwitz," and that is because of the absolute bastardization of culture at the hands of genocidal maniacs, the way in which music was used as part of the process.
In his fifth Reith Lecture, when talking about Israeli culture, Barenboim relates how a cab driver asked Jascha Heifetz, during Heiftz' first visit to Israel, what cadenza he played during the Beethoven violin concerto. Why is it that Wagner's music alone is the subject of an unofficial ban in Israel, especially, as some other posters have noted, most of these people probably were anti-Semitic? Wagner's anti-Semitism was especially profane, and he published a lot of it, and he was glorified by the Nazis in a way that others were not. Klemperer was one of the finest interpreters of Wagner in the 50s and 60s, and it is worthwhile to note that Klemperer himself fled Germany because of the Nazis and was forced to settle in America for a time. Klemperer conducted Wagner's music, and recorded a lot of it (and his Flying Dutchman is still considered a reference), even though Klemperer knew how the music had been used. That doesn't mean that those that heard the music while experiencing the Nazis' crimes should have to listen to it again; whether or not the Nazis misused it is really beside the point. What matters is that it was used, and how it was used, and foregoing the Tristan prelude in concert in Israel because of the suffering experienced by some of its citizens seems a small thing to ask of those that were spared the same experience.