Prohibiting or limiting access to information is always censorship. Censorship of third-party information by governments is universally wrong. If you want to protect your children from certain types of information via censorship, that's not necessarily wrong, but it's entirely your own responsibility.
There would be absolutely nothing wrong with this censorship list if maintained by a private entity and voluntarily applied by individuals to their own Internet connections.
You believe that censorship by governments is universally wrong, but that view is not universal. German laws have been oriented to allow censorship since the allied occupation of West Germany. It is perfectly legal by German law as it is practiced where there is no contradiction with civil or European law.
The German populace was generally supportive of this censorship in the post-war period to mend the ideological rifts that drove society apart in the early part of the cold war. While views are certainly changing in the "information age," if the German populace changes its views on censorship then it needs only to change its own laws.
It is not as easy as it sounds. The law in question states (Article 5, German basic law):
(1) Every person shall have the right freely to express and disseminate his opinions in speech, writing and pictures, and to inform himself without hindrance from generally accessible sources. Freedom of the press and freedom of reporting by means of broadcasts and films shall be guaranteed. There shall be no censorship.
(2) These rights shall find their limits in the provisions of general laws, in provisions for the protection of young persons, and in the right to personal honour.
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In theory, it is quite easy to fix the problem: Remove (2) and you are done. In reality, no politician would ever try to do that. "You are against keeping children save?", "You are against honour?" and so on. Still, it would be for the best to remove it ... the government uses it to push every shit they want in regards with censorship - after all, basically everything can be restated to be "for the protection of young persons".
There is inherent risk in any type of censorship. If it needs to be applied, it needs to be done carefully and in the open.
In this case, this is hardly a misunderstanding in values as you argue. Most of the URLs are not political and have very little to do with national socialism.
The maintained list of URLs is sloppy and apparently done with little, if any, public oversight. That raises quite a few red flags. The fact that the German government is trying to intimidate Neocities raises many more red flags.
That's true, the whether censorship is morally wrong is open to discussion. However, it is also completely ineffective for practically any purpose, and has been abused in virtually all instances that it has been implemented.
I think both of these points show that it is an unnecessary and excessive restraint of individual and collective freedom.
The list is organized by a public institution, but the review teams (that actually put things on the list) are 75% non-government people. There's an appeals process, its use is opt-in.
There would be absolutely nothing wrong with this censorship list if maintained by a private entity and voluntarily applied by individuals to their own Internet connections.