Uah, lots of misconceptions here, as usual in a Hitler thread.
First, no matter how many people repeat it, Hitler was not in Civ1, neither was he included in Civ2. Just play the game(s) and check.
Second, depicting Hitler is not illegal in Germany. we have movies about Hitler, books with his face on the cover, school books, encyclopedias etc. Depicting Hitler is *only* illegal here if it glorifies Nazism. Hitler running a civilization with Free Speech and Emancipation (as an example) certainly wouldn't glorify anything. It would not be illegal, although some people might want to take the game to court. They'd probably lose their case there, but I guess that Firaxis doesn't want the bad publicity that such an affair would generate.
As a side note, certain Nazi symbols *are* illegal in Germany. This is because of a law the Aliies imposed after winning World War 2, this law simply has never been revoked. As it stands, Displaying Hitler in a game is not illegal (as long as it doesn't glorify Nazism), displaying Swastikas (and some other symbold) however is.
Third, calling Hitler a "good leader" except for his cruelties doesn't show much knowledge of history. Hitler's economy would've totally bankrupted and destroyed the country, not to mention that huge parts of it were simply fraud (see MeFo-shares). He just knew that he could get away with that because he was already preparing for war. The only thing the nazis were pretty good at was propaganda - as can be seen, people believe their lies even decades after their demise.