Do not count on a disclaimer in the readme to "indemnify" the translator. I don't know how realistic the notion of legal trouble is (probably not very), but it's probably reasonable to imagine offending potential players. And as a player I can tell you that I have never once read a readme.
A third option would be to pick a new, relatively inoffensive word to assign to the enemy. I have no idea what game, context, or term might be, but if it took a delve into the original Japanese text to discover the antisemitism, then it's reasonable to believe there is nothing else specifically identifiable as Jewish about this character. So, call it some generic term, like "punk," or whatever, and move on. If it needs to be something that implies religiosity, how about "zealot?" Or "cultist?" Anyone who happens to know what term was omitted will surely understand the choice, and those who don't probably don't need to.
Reading the readme would kinda be necessary, as patching PSX ISOs is rarely easy. You have to extract and decompress everything, apply the changes, then recompress everything, just look at the steps necessary to apply this patch:https://www.romhacking.net/hacks/3091/
which just adds a variable font width to Xenogears. It's not exactly simple. (took me FOREVER to get that one applied... granted, it's the only PSX ISO mod I've ever applied, so some might be easier, but still...)
And legally, even if the end-user doesn't read the fine-print, the company is still protected. Just look at how much banks screw people over with their fine-print, lol. That said, I don't imagine it would be too hard to add that disclaimer onto one of the startup logo/copyright/etc. screens, he's already messing with the game's text.
Also, his dilemma seems to be more moral than legal, which is something I honestly can't fault him for. Even when telling me about it, he was making sure I wasn't offended by it, and knew he didn't think like that. Anti-semitism is a VERY sensitive subject for some people. Which again, is not something I can fault them for, quite the opposite in fact.
A new name for them is an interesting idea, but I'm pretty sure he's going for as accurate as possible translation for the game (some of the updates to the translation, as well as the meticulous research he's been doing on pretty much every single line is pretty impressive), so he may not go for that. That said, I'm doing my own research now to see if I can come up with something to call them that still fits with the lore of the game... I think I've already read a good 100k words of stuff on the game's deeper lore just trying
(and failing) to find the stuff about them (this crap is OBSCURE!!!), lol.