Personally, I think the popularity of the genre (which I suspect is on the wane now) is due mostly to the very American cultural aspect which sees the nation's troops always hailed as heroes. All the pledging alleigance, "support our troops", etc. Interestingly, on a sidenote, and I'd be glad to be corrected here, weren't the soldiers after Vietnam quite despised?
This thread has been very interesting. I think there's some amusing irony in it too. Considering how controversial the airport-massacre scene was in whatever generic, bland, military clone it was in, the media, particularly the American media would go ape if there was a game which allowed killing American or "allied" troops. It would be in all the news, be cast as the work of the devil...and the ironic part is that it's gamers, as demonstrated by most responses so far, that have the least trouble separating reality from a video game and playing something for the sake of entertainment, interactive story-telling or, dare I say it, escapism.
One step further then, where is the line which you won't cross, that would make you think that's a bit too far? For my part, I personally think Manhunt and its ilk represent mine. I have shelves and a hard drive choc-ful of games. I've explored galaxies, slain uncountable dragons, sailed the Carribean, explored the Underdark, raced at Suzuka, locked swords with demons and men, but the idea of being a murderer seems pretty deplorable to me.