The premise of some sort of "dilution" of the term nazi doesn't seem true -- usually I see that assertion in the context of an actual increase in nazi-like actions. Thus the more likely explanation is that the term 'nazi' isn't diluted at all, but more applicable now than in quite a while!

I assume the connection to israel perpetrating a genocide upon Palestinians is that, in similar fashion, a small, vocal minority is claiming some sort of "dilution" of the term 'genocide', and receiving a similarly weak reception?