Yes, he was a Nazi. Then he woke up from his nightmare and found himself in the Good Old USA!
Remind anyone of the feelies from Aldous Huxley's "Brave New World"? For those who don't understand why I say that, the "feelies" were a form of entertainment that would brainwash the citizens to the Governments liking.
Walt Disney's "Der Fuhrer's Face" was an Oscar winning cartoon, I might add. It's on the "On the Front Lines" Walt Disney Treasures DVD set if you want to see it and become more informed. An enormously popular film, the theme song ("We heil, heil right in der fuhrer's face..."), as recorded by Spike Jones, became a national hit (still easily available on Spike Jones CDs).
Donald realizes how lucky we are not to live in "Nutzi-Land" where citizens have no freedom and awakens from his nightmare to the relief that he is 100% red, white and blue.
Yeah, no need to restate the obvious, as this is one of many very clear and non-mysterious wartime cartoons. And as Melonballer has mentioned, there's nothing "banned" about it. I watched it on DVD via Netflix not long ago.
A lot of the online copies of Der Fuehrer's Face on YouTube also claim that it's a "banned cartoon," and it never was. Why would it be? In 1943, when it was released, it was considered a part of the war effort. After the war, it wasn't widely released, sure, but that's because there was no real need to release war propaganda films.
Well, according to Wikipedia (and we all know how accurate THAT is!), Der Furhur's Face was not so much banned by anyone as it was held to limited distribution by Disney themselves. That's a whole different thing than being banned. I am betting that they would not have released it to Germany... and now, with the advent of Youtube and the like, it is unlikely much of anything like this gets banned anymore.
This is certainly not the most controversial film Disney ever made regarding WWII enemies. In Commando Duck, Donald fight's Japanese, who are portrayed in extremely stereotyped ways. And Disney also produced "Education for Death," which was extremely graphic in its portrayal of German children being education as the strong overcoming the weak, with goosestepping Nazi children depicted in blood read vignettes. It tops the list as one of the most graphic wartime propaganda pieces ever made.
Disney self-polices these pieces that, to modern audiences, could really be considered offensive to former enemies today.