I am sure you all are familiar with the rumor that Hitler's paternal grandfather was Jewish, making him, by Nazi standards, racially impure. I am also sure that many recognize this to be just that - a rumor. Though I won't go into the details (Kershaw explains it best), these claims are entirely unsupported and, in a few regards, outright nonsensical. But why do people keep saying that he was 1/4 Jewish? Is it because the irony has so much appeal, because it helps explain his anti-Semitism, or something else?
I have seen some of the German nationalists (of the Holocaust denier kind) as well as antisemites in general, use this meme to blame the Jews for Hitler, in more than one way. They will use his alleged ancestry not only in a symbolic way, but also to "prove" that the whole Hitler thing was a Jewish conspiracy (!).
As to why the average Joe would repeat this meme - it's the "irony" that you point out. This "irony" makes this meme especially potent given Hitler's role in the public consciousness.