Kurt Cobain is survived by his family, friends and fans. To many of those people, this is an act of disrespect towards a loved one and a violation of said loved one's final wishes.
One can easily point out the hypocrisy of Kurt Cobain's anti-commercialism, Courtney Love's folly, and any number of reasons why, logically, people shouldn't care about this. The problem, however, is that this is an emotionally sensitive issue and whatever rationale people may have for why it's okay isn't enough. Nothing short of evidence of Kurt Cobain's approval is going to placate those who feel this is a violation of someone they continue to care about, and many of those same people would feel betrayed if such evidence was found.
The issue, as I see it, is that the creators of this game must have seen this controversy coming, but were not stopped by it. They knew this would upset people who cared about Kurt Cobain, but cared more about making money off of his image. There could also be the (likely accurate) perception that this controversy was allowed as a means to get more people to hear about the game, and that just makes the perceived insult worse.
Of course, given that last hypothesis, the best thing a fan of Kurt Cobain could possibly do is simply ignore the issue and say nothing.