That's not quite what happened - his reference to this woman a throwaway jab at her in the middle, when it got out of control.. He wasn't asked about the woman or the controversy with her (she wasn't mentionned in the question), he was asked (among other things), about his admiration for Speer's work (the statements that got this woman to attack him in Danemark). Von Trier waa being questionned about his movie and giving disinterested, provocative answers. At some point a journalist questionned him about his choice of Wagner's Tristan and Isolde for Melancholia, his interest for German culture, the fact he discovered only at his mother's death in 1989 that he was German, and also about his comments about Albert Speer (in a Danish interview).

Von Trier answered (I translate): I've long thought I was a Jew, and I was happy to be a Jew (...) But I discovered I wasn't a Jew, I was a Nazi, because my family was German, and that made me happy too. (...) I understand Hitler. He's done horrible things, absolutely, but I can imagine him sitting in his bunker at the end. I'm saying I understand the man, he wasn't a good guy but I have some sympathy for him. Of course I'm not in favour of the second world war, I'm not against Jews (it's here he adds "Mrs. X" excepted), but not too much for them either, as Israel is a real pain in the ass. (That's when Kirsten Dunst's jaw dropped and she said "oh my God" and kept looking at the other actress, half-Jewish, who shows no reaction, as if she hoped Charlotte would jump in with something and stop Von Trier... She probably didn't know Charlotte's father was probably the most politically incorrect and most provocative artist in France ever... Her dad did stuff like this all the time!)

On the subject of Speer (Hitler's architect, the one who staged the look of the big Nazi rallies and public events, later minister of armament and condemned at Nuernberg for crime against humanity) "what I want to say is that okay, he wasn't one of God's best creatures, but he had this astounding talent, that the Nazi regime allowed to blossom."

It went on in less and less coherent disgressions on the topic for about 2 min. The audience at first was split between shock and embarassed laughters (the European journalists are used to Von Trier's provocations, the other media less so), but toward the end it's embarassing silence and Von Trier realizes this and says "oh God, how will I get myself out of that one now", then laughed with embarassment, shrugged and concluded with "So, I'm a nazi".

So no, it wasn't out of context. He went in provocative mode instead of giving serious answers, as usal, and this time he digged himself a hole and fell in (which is pretty much the explanation he gave in his apology afterward, adding he's neither antisemitic nor nazi).

What I haven't seen mentionned except in the French media is the fact in Von Trier's movie, Dunst ruins a very stuffy wedding ceremony (by deciding to leave the groom for a man she met at her wedding) and it's been pointed out Von Trier seemed very eager for the press conference to sink into scandal (before the Nazi comments, he had gone into porn etc.)

Since then he's given another provocative interview saying "Even if I were Adolf Hitler, if I made a good film the Festival would have to take it" and that he was "not a little proud to have been declared persona non grata", then pointed out "but I'm not Mel Gibson" (a reference to the fact Gibson, for all his homophobic and racist past statements, was at Cannes for Jodie Foster's movie).