Basically, I think Wittgenstein was too quick to pattern-match every mention of such things as "national character" with propagandistic nationalist ramblings. I suspect this is just an instance of a bias that's been widespread in the Western world for quite a while now, namely the tendency to write off the use of certain kinds of conditional probabilities about people, including most of those conditioned on national origin, as inherently incorrect or immoral. (With a lot of equivocation about which one of these two is actually meant, and how come that the former category just happens to subsume the latter so conveniently.)

Moreover, from the "wouldn't surprise him at all" comment, it does appear that Wittgenstein had, for whatever reason, a biased unfavorable view of the British government. To the best of my knowledge about the state of the world in 1939, this would have definitely been, by all standards, an event far too surprising and shocking to characterize that way, under any reasonable interpretation of that phrase.

Finally, Wittgenstein's reaction is reported as "furious," and he describes himself as "shocked." It seems clear that the very fact that someone got into a shocked and furious state of mind during a conversation about controversial and mind-killing topics makes it very highly probable that at least some sort of bias has kicked in, even if my above guess doesn't identify it correctly.

(Come to think of it, I don't find it implausible that Wittgenstein could have been intentionally baiting Malcolm, hoping for an opportunity to show off some sanctimonious indignation. But lacking any detailed knowledge of his character, this is nothing more than idle speculation.)