This episode was definitely a turn for the better, compared to most of last season. The first act with the cardboard cutout was a bit dull, but it got better afterward. The plot set up a lot of good jokes. For example, they parodied Schindler's List not just because they felt like it, but because it tied in with the episode's plot and the result was funnier (or more horrific, depending on your tastes) than just "remember that movie?" Even the obligatory religion bash at the end was funny because having Jesus himself deliver the punchline coated the whole thing in absurdity.
And if you found this episode offensive, consider this. The writers were not bashing Jews at all. Peter was being a jerk to Lois, and Lois fought back -- that's it. You shouldn't take that personally, even if it makes you uncomfortable.