From academic point of view medieval Ethiopian history is a huge mess, we don't even know for certain how long Zagwe dynasty ruled. There's plenty of folklore about Jewish Kingdom in Ethiopia, but not that many actual facts and historians have different theories.
Very true. The history files as they now stand seem to be very loosely based on sources which say there were Jewish members of the Zagwe family; I used that as my justification to replace the completely ahistorical Solomonid with a Jewish Zagwe ruler. There probably wasn’t an independent Jewish ruler of Khazaria in 1066, either, but I liked the effect on gameplay. (Similarly, when I played Matilda di Canossa in early builds, there was so much wrong, historically speaking, with the situation in which she’d invariably get into a conflict with the Pope because the Papal State was in the
de jure territory of her title of Duchess of Spoleto. But it set up some great strategic dilemmas early on.)
And while I agree with some posters that medieval Jews had important positions as courtiers especially in Iberia, it's probably easier to leave them out so you don't have to simulate stuff like Granada massacre of 1066 or European pogroms during the crusades or expulsions of the Jews. That might be bit touchy subject to some. Some flavour events about philosophers like Maimonides would be nice though.
I’ve discussed in the past some other ways in which historical figures could have an influence on gameplay. For example, a number of rabbis who travelled to different countries in the time period (including Petachia of Ratsibon, who wrote about the Jews of Crimea and Khazaria in a letter I’ve discussed) might usefully be represented in the game as spies. Now that trade networks are appearing, their role in those could be relevant. Maimonides was not only a philosopher, but one of a number of Jewish court physicians, who could definitely appear for flavor in that capacity. (Indeed, around this time, one of the acts that won Saladin his reputation for chivalry was dispatching his personal physician to treat King Richard.) His predecessor in the court of Caliph al-Mutansir in 1066 was named Ephraim ibn al-Za'faran. Even if having Jews around just meant that some modestly-beneficial flavor events popped up every so often, it would be a nice touch and I think players would try to get those events to fire.
As for the reluctance to add Jews to the game, I suspect there are two things Paradox is trying to avoid. One is a Pogrom button, or especially anything that would enable an evil playthrough that someone could use to damage their reputation. They might have less concern about antisemitism that the player doesn’t instigate, or choices that are more about how actively to protect one’s Jewish subjects, but that’s up to them.
The other would be a stereotypical representation. For example, the one thing that everybody “knows” about Medieval Jews is that Jews were moneylenders and moneylenders were Jews. That also happens to be false, and I’m glad Paradox ditched the portraits of the hook-nosed moneylenders from the first Crusader Kings game. A lot of these stereotypes are ostensibly “flattering.” The other thing that everybody knows is that Jews were victims, so when people say that it wouldn’t be a good idea to have Jews in the game just as moneylenders and victims, one reaction you see is, “Oh, then there’d be nothing for them to do.”
I don’t think Paradox is ruling out having Jews in the game at all. (The quotation supposedly establishing this is being taken completely out of context; in a game where Jews already existed, the dev was saying that it wouldn’t add events to spawn more of them randomly if they disappeared, not to do anything but just for the sake of having them around.) More likely, they haven’t come up with a good reason to put them in yet. I’ll note that the fact that there’s interest in them is itself a fine reason to have them; what better reason does a game need?