Did Pepe realize that Claude is a Jew?

I just watched the film on TCM. (7 Nov 2011) I enjoyed it and went immediately to imdb to learn more about it. I found your question interesting. It effectively motivated me to think a more about what the film was intending to convey... So thanks!! Here are my thoughts:

The filmmaker, Claude Berri, makes no effort to answer the question you've posed, so I think it reasonable to assume that it was not a particularly important or relevant question for him. Either that, or maybe he's just not a very good filmmaker, and has left us with a muddled, ambiguous story that has no "resolution"... But let's assume instead that he's a very good filmmaker, and that there is something else we should be looking for in the film.

I believe Berri did not intend to portray a "glossy image" of the times in which the movie was set. The attitudes expressed by the old man were commonly held, earnestly felt, and frequently expressed. Antisemitism was endemic throughout Europe at that time. In many respects, it remains so today. The Holocaust could not have occurred other than against this historical legacy, and there is no reason to feel confident a similar thing could not happen again in the future.

The purpose of the film is not to create a contrived scenario that will lead the old man to recognize and overcome his prejudices. Rather, the goal is for us as viewers to do so. It is we the viewers--not the old man--who potentially have the perspective and clarity of vision required to see that the old man's prejudices are invalid, and that they serve him no beneficial purpose. In fact, if circumstances had been different, the man would have lived out his old age with a hole in his heart that might otherwise have been occupied by the boy. It was the circumstances of the war that brought the two of them together.

It doesn't matter if the old man is able to see this himself. It doesn't matter if he is able to recognize or rationalize his prejudices. The essential point is that the attitudes expressed by the old man were both commonly held, AND fundamentally incorrect. In particular, the old man states that he could not, or would not, have taken care of the boy, nor allowed the boy into their home IF the boy were Jewish--NOT if he KNEW that he were Jewish, but IF HE WERE Jewish. Can we really question his sincerity? Despite this--either wittingly or unwittingly--this is precisely what the old man has done, despite the boy being Jewish. Let's suppose for a moment that he did know. If so, this did not discourage him from expressing his anti-Semitic views. Nor did it prevent him from forming a genuine paternal love for the boy. So let's just simply assume, instead, that his prejudices AND his love were BOTH genuine. In either case, it doesn't affect the outcome.

As 3rd party observers we, the viewers, can see that the old man's love is genuine in spite of his prejudices, and, more importantly, in spite of the boy being a Jew. We can see that the boy and the old man both fulfill essential needs for one another. Unless (out of bigotry) we believe that such a scenario could never actually happen, this leads us to only one possible conclusion... that there is nothing inherently related to the boy being Jewish that prevents the two of them from forming a loving bond, and enriching one another's lives.

In a broader sense, I think we are expected to see that any such prejudices serve no useful purpose; that they are a barrier to love, acceptance, and harmony. I think Berri expects us to see what we would ideally have liked the old man to come to see--yet cannot reasonably expect him to see--that his prejudices are little more than useless baggage he carries around with him every day, poisoning his heart.

Some commenters on the movie seem unhappy with this outcome. They seem to want there to be some "resolution", or "awakening". Wouldn't it be nice if the old man would suddenly realize that he had been wrong all along. Unfortunately, it is unrealistic to expect this. Bigotry did not end with WWII. There are still plenty of people who believe the sorts of things the old man expressed, if not toward Jews, then toward other religious or ethnic groups.

It is we, the audience, who are supposed to see the insanity and uselessness of this, irrespective of what the old man thinks.