But is this intended child audience developmentally ready to really understand the Holocaust?I'd venture "no".
I grew up in a "survivor" community, and my Jewish upbringing was basically God of Abraham-Isaac-Jacob/Masada/Holocaust. With some Hebrew thrown in (prayers and Rocket to Mars). Nothing really about the joy of being Jewish - nothing about the great accomplishments (running away from pogroms does not count). The constant message was "we're doomed - everyone hates us". What a way to grow up, right?
Children don't always understand context. They don't always understand adult motivations. So giving them books like this isn't likely to increase understanding between religious groups, nor is it likely to make them aware of the horror that was the Holocaust (or genocide in general). My guess is that the more we dwell on this, the more we force them to "understand" the less they'll take in at an age when it's really appropriate. They'll watch movies like Schindler's List in an inured state, without reacting the way they're "supposed" to.
I'm not suggesting that all books for children be happy-laughing-fairy dust type books. Far from it. But let's not preach at them in hope that they'll Learn Big Lessons. Let's let messages creep in "Past Watchful Dragons".