Salma Yaqoob has written a very good piece on why Muslims should participate. I'll let her say it:

Palestine should not be a reason for boycotting Holocaust Memorial Day, but a reason for participating. As the peace campaigner Uri Avnery, who organised a demonstration against the killing of Palestinian children on last year's Holocaust Memorial Day in Tel Aviv, put it: one of the lessons of the Holocaust is that you must not accept an ideology telling you "that other people are inferior and subhuman" or that loyalty to your country justifies "the occupation of another country and oppression of another people".