doesn't represent their southern history
It represents an important part of it. Kind of surprised you don't get that, given that you've lived down here. The Civil War was a defining moment for the south (for the country as a whole, really). Fighting and losing a war, then getting restructured will leave an impression, especially in a tradition/history-focused culture.
You compared the flag to Nazi Germany's, which I think is a strange comparison, but it's the same idea -- why do you think Germans want to bury that flag and never see it again? Precisely because it does represent an important part of their history, a part they are ashamed of and want to repudiate.
Some southerners are the same way (ashamed of it, want to repudiate those days). Most are indifferent. "Who cares, that was a hundred years ago." (Hey, it's the south, the schooling isn't that strong.) But some are proud of it or at least have some respect/fondness for it.
That group is composed of two other groups: 1) the old timey traditionalists with long roots here, who talk about the positive and nostalgiac aspects of that era and perhaps have family members who fought/died in the War and 2) the rednecks, in whom racism is often alive and well (as it obviously is for the gentleman in the OP).