Teaching such sensitive subjects appropriately is difficult. For instance, a trip to the Holocaust Museum might be appropriate for a senior honors class, but definitely isn't for 8th graders.
I'm not sure how they're teaching it in England that is causing the Islamic students to get upset (or if that isn't even happening but they're speculating that it might). But religion had nothing to do with the Holocaust; it had to do with, among other things, a bizarre attempt at eugenics in which certain groups were seen as undesirable. Only about half of the people killed in the Holocaust were Jewish (eta: I don't mean to minimize this at all, just that a lot of the time people teach it as though it was about one single group when there was an over-arching theme of killing anyone who didn't conform to the ideals of a lunatic. Romani, political prisoners, gays, Jehovah's witnesses, Russian people, disabled people, etc. I don't understand why the fear of antisemitism is the one which causes them to stop teaching it. Why not a fear of any other kind of bigotry/racism/etc)
If the teachers are met with anti-semitic reaction, then that is a good way to open a dialogue about why they're wrong and why it isn't okay to be a little bigot. If that doesn't work (because, as they're children, they're just repeating what they've been taught) then maybe some more drastic interventions are needed. But, avoiding the topic entirely is in a sense institutionalizing antisemitism as okay, and that's detrimental to everyone.
Teaching about slavery, at least when I was that age, was a very similar thing. Textbooks barely mentioned it, except as the cause of the Civil War. I'm not sure what they feared-- children agreeing with slavery, maybe. There were no black children in my elementary school. I think people underestimate children's ability to comprehend things like this. Children understand the atrocities that people are capable of, though of course there's no need to describe it in detail.
There are age-appropriate books about the Holocaust for most age groups. Number The Stars is a good book, doesn't go into detail really at all. Most kids are required to read either the diary of Anne Frank or Night in high school here. I read both, both times with two or three Islamic kids in the class, and there was never an issue.