If after 400 years they were still enemies, they'd be a high chance that the babies of the time would still grow up and continue to be enemies. For an all knowing God to know at some point these people will be a real threat to salvation, and then say to wipe them out for what they did 400 years ago still fits, as they're still just as bad as they were back then.
I agree that if the Bible is all non-sense then the reasoning would be similar to the Third Reich. But if you believe that the outcome of what happened did actually mean our salvation was secure that surely it would have been just. That, really is the only point I'm trying to make here. If you don't believe it, then you're probably right about God being an evil tyrant. Though one could still argue God works in mysterious ways and as being judge and as all have sinned he has the right to wipe out whoever he wants. Though, that's not something I'd want to argue. :)
I agree that people can use the Bible to support their twisted ethics. But I think that's only when they twist it to support what they believe, not what the Bible teaches.