I researched this event extensively for my first novel and I'm happy to share what I found.
The program you're talking about was The Adventures of Superman which aired from 1940 through 1951 and was sponsored by Kellogg's Pep Cereal (that's going to be important in this story later). Keen comic book historians will note that this show began airing a mere two years after Superman's first comic book appearance in 1938 (Action Comics #1). This shows just how quickly Superman, and the whole concept of superheroes, had risen in popularity (in the wake of Superman, you had Batman, the Human Torch, Namor, and many lesser known debuts before the '30s ended). By the mid-40s, the entire nation was obsessed with superheroes and, of that group, Superman was king.
Of course, one of the biggest reasons for Superman's rapid rise of popularity (and superheroes in general) was WWII. In every iteration (comic book, newspaper strip, radio show), Superman battled Nazis and Axis powers and bolstered the morale of American boys and girls nervous about the fates of their fathers and brothers overseas. It was the perfect combination, a villain so powerful and evil it could only be met by a hero with superpowers.
And then the War ended in 1945 and the creators of these superhero stories were faced with a dilemma. Whom would the most powerful beings in the world face now that Hitler was gone?
Enter human rights activist and author Stetson Kennedy. Kennedy wanted to expose the inner workings of the Ku Klux Klan to the world and so infiltrated the Klan and recorded everything he witnessed. (It should be noted that the Klan during the '40s is considered the Second Klan, and was different from the Klan of the '60s or the Klan of the 1800s. The nation was greatly divided in their opinions about the Klan and many associated the Klan with fascism) Kennedy took all of his notes exposing illegal activity on the part of the Klan to the police, however the local police refused to do anything about it, reportedly because the Klan had infiltrated the police force.
And so you had a group of writers looking for a new villain comparable to the Nazis and an activist wanting to expose a group many saw as fascists in America. It was a match made in heaven.
"The Clan of the Fiery Cross" was a fifteen part series that aired in 1946. In the story, an Asian-american kid named Tommy Lee needs Superman's help as he and his family are facing opposition from a mysterious group that wears hoods and terrorizes the minority community. In the series, the writers used the information given to them by Kennedy, including code words, strategies, etc. and built a villain that was recognizable to their audience. And the audience loved it.
And the Klan did not. The Klan petitioned Kellogg's to order the writers to stop the series or drop the show all together. But the reaction of the public was so unbelievably positive, Kellogg's denied the claim. This would prove to be a fatal blow to the Second Klan. The entire organization fell apart on a national level and, from the '50s through the '60s, any Klans that rose up were local groups with no true national leadership. And when the Klan rose up, they faced a reality that America now viewed them as comic book status villains instead of the freedom fighters they had hoped to portray themselves as.
One trivia item of note, you talked about how Superman had as association with "all-American" values, and you probably think of the phrase "Truth, Justice, and the American way." The tag on, "The American way," wasn't included in the radio show and only became part of the Superman vernacular until much later.
Sources:
Listen to the radio series on Youtube
Read a summary of the story on Superman Homepage
A brief article on Mental Floss
The Klan Unmasked by Stetson Kennedy
Superman: The Complete History: The Life and Times of the Man of Steel by Les Daniels
Hi there!
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There is a spectacular book on exactly this subject, and if it truly interest you I suggest you get it. The name is "Superman Versus the Ku Klux Klan" by Richard Bower. Most of the information I can give here stems from that source, along with some common historical knowledge one can find at sources such as Supermanhomepage.com. That site is a great source for information on the caped crusader, but I always ensure any statement I make from an internet source (that is not a .org, .gov, or .edu) is triple verified; which is to say I must be able to find matching stories from at least 3 non-wiki web sources. The main three I used for this were the one stated above, Otrcat.com, and from listening to some of the actual program, which is also available on otrcat, an other places.
Also, in a sidenote, the kkk arc was one piece of a broader agenda the radio program was pushing around this time in the form of 4 arcs (called together "the unity house" arcs.) That promoted American values of freedom, and equality for all Americans in a time where post war disgruntlment was rearing its ugly head.
I will answer the second half of your question first. By 1946, the year "Clan of the Fiery Cross" first aired, Superman the radio series had already been running for six years, five days a week. He was very well known, had been chopping down Nazis, Italian Fascists, and anti-Semitism for years to this point. Some of the most highly rated episodes were in the story arcs called "The New German Weapon.", And "German Submarine Menace." the radio hour was many families evening program as they heard all the men who caused fear get trounced by this All-American Superman. The famous "It's a bird, It's a plane" line had it's beginnings in the radio show, his weakness to Kryptonite was created to give his voice actor, Bud Collyer, the ability to take time off in 1943; the persona of a reedy voiced Clark Kent changing into the baritone Superman was created by the voice actor even! Superman was by this point definitely the superhero we envision today, mostly thanks to this program itself.
Now to backstory of the story arc.
By 1946 Superman was back to fighting supervillains and people were losing interest. The war was over, Superman defeated all the real evil, what was left to listen to? Luckily for the producers a southern journalist by the name of Stetson Kennedy was looking for an outlet to do real good, and just so happened to be infiltrating the KKK under a false name (that of a dead uncle who had been a member). By this point, Stetson had turned over the information to authorities, even got the klan sued by the irs for $685,000 in tax dues in April 1944, which caused them to legally disband by June of 1944 (https://www.encyclopediavirginia.org/Ku_Klux_Klan_in_Virginia#its5). But he was frustrated, and fearful, as local authorities were either too afraid to act or worse were supporters/members of the klan, so he turned to the one national name he knew could stop them: Superman.
Stetson approached the creators and gave them what he said was inside information; handshakes, codewords, meeting places. He helped the writers make the storyline creating a thinly veiled interpretation called "the clan of the fiery cross," and from there the rest is, well, history.
Which brings us to the point of how this was taken, both In the South and elsewhere.
The Klan did not, as you could expect, take this well. Especially the end, where it is revealed that the leadership is nothing but shills spreading hate they don't believe to make money selling robes to rubes. This, along with the codewords and other aspects of the organization presented made the group lose its mystique, and soon enrollment began to plummet. There were calls for boycotts, by the klan, on the serials cereal sponsor Kellogg's PEP (this is the era of sponsored programs. like the original soap operas presented by soap brands aimed at housewives). But, that only further weakened The group, as it gave substance to the idea that the odd codewords and other aspects said on the program hit a little to close to reality for them to feel comfortable. The story was such a hit nationally that Kellogg was not intimidated, and stood by their political stance. It was a huge uptick in listeners compared to the previous arcs. The show went on to have mostly good ratings and continued support until it's end in 1951.
I hope this gave you everything you were looking for.