1. I'm of German (and Welsh, but that's not important) descent and have lived in Germany, I don't find it offensive because I know the assholes will get what's coming to them.
2. The word Nazi refers to that specific party, which only exsisted in Germany; true there has been, is currently, and will be future parties like it and maybe with the same ideals, but only that one was called Nazi, and it happened to be in Germany.
The thing is, as wrong as the Nazis were, I refuse to see them as Evil. Not all Nazis were in on the whole murdering aspect, many were simply normal men and women trying to give thier country a brighter future.
In short, groups aren't Evil, only individual people are.
On a side note did you know that:
Austria is German too (not all Germans joined the German Nation)?
That Gypsys are the actual Aryans?
That the Swastika is a Hindu Peace Symbol?
English evolved from German?