I'm not one to say whether that makes you a hypocrite or not, because everyone does have a personal limit as to what they can find amusing. I just think that people in general need to expand that limit, which is I guess how my opinion relates to the topic at hand.
The General Custer game in itself wasn't funny. On a matter of ethics, the premise of the game should be absolutely horrifying, just as you said. What's funny about it though is that someone wasted time making such a worthless game, and I wasted time playing it. I guess I can't really explain why I found it funny. All I can say is that things that I know are not real do not affect me. While playing GTA, I can pick up a hooker, drive my car into the water, and then snipe her head off while she is drowning, and enjoy any second of it, yet when I go out into the real world I'm still the same polite and friendly person that I've always been.
Also, I should probably elaborate on my opinion about political correctness. I have nothing against respect, in fact I think it is very important for people to respect each other. What I despise is when people go out of their way to eliminate any possibility of offending anyone who could ever conceivably catch wind of what they have said. For example, we have the continually evolving descriptive words for disabled persons. Originally we had the word "crippled," then "disabled," then "handicapped," and now it's "people with diverse ranges of abilities." I kid you not, that is the phrase that is used now, as well as "differently-abled persons." I participated in a problem solving course last fall at my university where we worked on making the campus more accessible, so that's why I know about the transition of these politically correct phrases.
So, what bugs me is not being respectful, but doing so to the point that it gets completely rediculous. It makes much more sense for everyone to just take things lightly and not be offended at the drop of a hat. We shouldn't need to continually update how we refer to categories of people, nor should we have to worry about what content is in games. Some people like me already don't care, and I think that more people need to learn to be that way.
I have to grant to your side of the argument that my opinion represents an ideal case and the real world is not so perfect. People do get offended by things. My response to them is "too bad, look the other way." I won't impose myself on them as long as they don't try to limit my fun. Kids do get ahold of games that their parents don't like. My response is that the parents have failed to do their job on several levels. First, they failed by being naive about the abilities of kids to get what they want. Second, they failed because instead of teaching their kids about life, they tried to shelter them. Third, they failed by being closed-minded and uptight about something that is not real.
We can put all the warning labels and boycotts that we want on games or any other kind of media, but what the problem always falls back on is an issue of family values. Parents need to teach their kids right from wrong, real from virtual, and harmless from offensive. If this has been accomplished, kids can be exposed to nearly anything and not have negative results. I've been exposed to violent entertainment all my life. I used to play River Raid when I was 4, Eye of the Beholder II: Legend of Darkmoon in 3rd grade, Wolfenstein and DOOM in 5th grade, Duke Nukem in 6th grade, and so on. My favorite movie ever since about third grade has been Commando (I liked it then because it had good violence, now I like it just because it's so corny and lame). Where were my parents through all of this? They were with me. I don't remember ever watching a movie without my parents knowledge until about 11th grade, nor did they ever tell me I couldn't watch something. As for the games, my dad played them with me. We still do Call of Duty deathmatches as a family whenever I'm home from college for vacation. I haven't even mentioned yet the fact that I've been shooting guns, real fireams, for as long as I can remember (since about 3 I guess). I grew up with violence all around me and I loved it. And after all this, I somehow am still a stable and respectful individual.
As for how to spread the concepts of openness and levity....I'm stumped. I don't know how to convince people to think logically when they are so absorbed by illogic. A worldwide decrease in religion and increased focus on intuitive ethics would probably help immensely, but again, how do you make such a transition? I wish I knew....