Hmmm. . .something about indulgences and praying for those in purgatory comes to mind.
Whether you agree with Catholicism or not (we know you don’t), we CAN show justification for Purgatory in the Bible, Mormons CANNOT show justification for baptism of the dead. The Catholic Church NEVER authorized the sale of indulgences, though it was done by some against Church teaching.
Prayer for those who are dead (for non-LDS, anyway) is not to convert. Praying for souls is just that: praying for souls. It doesn't attempt to convert Jews to Christians and it doesn't pretend to. It doesn't say to Jews that died for being Jewish that they'd have been better off LDS members.
Does praying for people in Purgatory insult the memories of Jews who died in the Holocaust? Not in any way I can think of.
I've never heard a single Jew complain about it. But plenty have complained specifically, and loudly about proxy baptism. Why do you think that is?
People of the Jewish faith have asked many times that the practice stop, yet it continues to this day. See: http://www.jewishaz.com/jewishnews/040227/mormons.shtml
And what indulgences have to do with anything is beyond me, unless you need to change the subject away from the one at hand.