Discrimination & Terror: How to (not) use it in a RPG campaign?

I'm curious about your opinions on this topic.

All scenarios I've run so far have had a minimum of discrimination. (Religious/racist prejudice only against those that were actually fanatic/inherently evil. 'Race' as in 'species', not colour of skin or whatevs.) But I've been wondering what can be done with it as a feature of a RPG world or factions within it. In which cases does discrimination based on race, gender, sexual orientation, religion etc. make for 'good' story elements, so 'good' that it's worth to actually implement despite it being a horrible thing by design? Granted that all players agree beforehand.

The other thing are (especially historical) terror methods. Again the question: What would justify to use such elaborate cruelty in a fictional setting? This came up when I thought about using aspects of the 'Zersetzung' ('disruption'/'decomposition') in a game as part of the BBEG's tactics. ('Zersetzung' was a catalogue of terror methods applied on people that were deemed oppositional in the German Democratic Republic.) I dropped the idea when I spoke to my players about it and one of them expressed discomfort about potentially having this done to their PC.

Both questions could also be differentiated between entirely fictional settings and those that explicitly try to recreate the life in a stage of real-world history.

Thanks in advance for your input, please be respectful.

Edit: Another distinction that could be made: If used, should discrimination/terror always serve to emphasize someone's evil nature, or could it sometimes be 'rightfully' presented as morally ambiguous as well?