Israel Silverman wrote:

I understand how this was upsetting, but I have seen slang usage of "joo"
= "you" frequently among some folks...

You are correct! I had not thought of that. However, the handle would then
mean "Kill the you?" I don't think so. I still think that "Killzjoo" is what
it sure sounds like - Kill the Jew.

Let's get a couple of things straight.

First of all "Killz" always stands for "Kills", not "Kills The".

I challenge you to find any exception.

"Joo" could be "Jew" but is more often "You."

A google search on [ killz kills joo you ]
http://www.google.com/search?q=killz+kills+joo+you

or on [ killz joo ]
http://www.google.com/search?q=killz+joo

clearly shows the most common usage.

There are plenty of real examples of antisemitism out there.
Please don't trivialize the victims by putting what looks like
an innocent attempt to convey "I Kill You" in the standard way
that online gamers convey that thought into something that
it is not.