Now this is a interesting situation. I do believe it would be wrong to fire this officer because of his beliefs or affiliations. What the KKK embraces is truly repulsive, but that does not make you a unfit police officer as long as you do not act on those beliefs or let those beliefs affect your conduct during your working time. That being said, to have this type of internal conflict not affect your work, he would have to be one really extrodinary police officer! If you really want to get rid of him, I have a suspicion that they can find some sort of work practice that doesn't align with the departments and do it that way (perhaps look at his racial arrest ratio).
International Level: International Guru / Political Participation: 863 86.3%
I wouldn't want to be the insurance provider to that municipality because that is an accident waiting to happen real or contrived. So given that there are those who believe in this person's right to associate, then using this line of reasoning members of the Hell's Angels should also be able to become law enforcement officers, after all they only associate with other motorcycle enthusiasts. Right?