Of cours burning the Puerto Rican flag was a sensitive issue, which is why the people got so mad when Kramer accidentally did it, just like people are getting mad about the episode in real life. So apparently the reaction is close to real. The humor was in the misunderstanding, not the descration of the flag.
And as for the Puerto Ricans trashing the Saab, I wouldn't call that specific to the ethnic group; George's father's car got trashed by a mob for parking in a handicapped space, and those people weren't Puerto Rican. I don't think anything in the episode commented specifically on Puerto Rican culture in a negative way (unless you take offense to Elaine's generalization "They're a very festive people"). -Kenny