Ignoring the legal side of this, since the question did not ask about that, let's look at this properly.
What good could possibly come of allowing this particular game? None at all. Don't give me the argument that it's a slippery slope, and that if we ban the Columbine RPG, then we start banning games for more and more minor infractions.
That's bull. You know it, and I know it.
If, perhaps, the game had some sort of message or wanted to highlight how much of a tragedy it was, we could pass it off as art. God knows it'd be more sensitive than the worldwide news coverage.
Unfortunately, the relative ease of creating freeware games and getting them 'sold' is going to make this difficult. If you're going to create a film, you need somewhere to show it. If you want a film to make a real impact, the only way you'd get anywhere is if you got into one of the amateur film festivals. You CAN put the film on YouTube, but then, of course, if it's improper, it's removed. You can have your own domain where you offer viewings, but in all honesty, people aren't likely to make a fuss out of some arseholes being arseholes on camera. If you write a book, you can either spend stupid amounts of money to get it self-published, which is hardly going to draw any attention to yourself, or you can try to get a publisher to do it for you.
If your book makes a comedy out of the Columbine Massacre, you're very unlikely to get published.
The simple yet professional nature of freeware means these things get taken seriously, and you cannot shut down somebody's domain for expressing their freedom, which means you cannot restrict the influence of this RPG. The only thing that can be done is to stop giving it so much publicity. If you want to be vigilante, get some friends and DDoS the site every now and then...because that is really the extent of our powers over this sort of shit.
So. In answer to the question. Should it be allowed? Hell no. It contributes nothing to anybody, except insults, slander and disrespect. A 'hilarious' film about this would never make the silver screen, so why should this be allowed to impress its vile influence on the rest of us?
It shouldn't.
However. Can we stop it? No. Never in a million years. To restrict this would mean policing the Internet. Now that IS a slippery slope. It's already difficult enough to know where to draw the line. People say stupid shit online. A lot. Two guys on some roleplaying site talking about a very realistic plan to destroy the Houses of freakin' Parliament or something could easily be taken seriously, and with harsh consequences to follow. It's because of this lack of context that you cannot regulate the Internet. So...no. We can't stop it. We can persuade filesharers and freeware hubs to avoid particular products, but if the creator decides to take it onto their own shoulders, there is really nothing anybody can do.
