Thanks for the comments, it's made me realise why I strongly want to feel that WWII is intended to be a distorted memory of a wizard conflict, or at least a conflict in which wizards participated. That's because I can't bear to think that the whole wizard community saw Auschwitz and Buchenwald and the rest and said 'No, the principle of non-intervention is more important'. I know it's not real, but I can't help but let my imagination run its course, and it's a horrible thing to imagine.
I think the issue is very similar to the debate around pacifism and non-intervention in Christopher Priest's 'The Separation' which is about parallel worlds where people choose to engage or disengage with Hitler. I also think Orwell's WWII writings deal with these issues very powerfully.
Of course that leaves the question of what the wizards should be doing right now, about the atrocities and starvation around the world in 2007. And I think that raises the question of what we should be doing. Because non-intervention is like ignoring the suffering to live in suburban comfort, but intervention starts to become rather like Iraq 'We'll sort out your problems for you'.
And of course this is also hinted at in the book, where Grindelwald's racial theories are initially presented as 'wizards should interfere with other human beings for their own good': the pseudo-benign face of fascism, the face it wore in the 1920s for instance.
So it comes full circle. Perhaps Dumbledore and Grindelwald fought on exactly this premise: G wanted to step in and stop Auschwitz and Hiroshima, D said 'No, let the muggles die in their millions but they retain their autonomy'. I don't like that idea, which is why I prefer the alternative explanation.
But anyway, sorry for rambling on, I'm working out my thoughts as I go. I feel the reason this is occupying my mind is because it is a metaphorical working out of real issues which occupy me a lot IRL: when is war justified, how can we help the people in Africa, how much of my comfort am I willing to give up etc.