I once saw the back of the VHS box of a documentary about neo-nazis in
the United States.  There was this one really chilling image:

A very sweet, motherly-looking woman is cutting up a cake in her
kitchen.  It would be a nice Donna Reed moment, except the cake has
been frosted to resemble a Nazi flag.

Thanks in advance.

I am confident that the video you're remembering is "The California
Reich," a very scary look at neo-nazis in the USA. It's hard to get
over that image of the swastika-frosted cake.

"The California Reich (1975)

A rare look at American crackpots. Young children give the 'Sieg
Heil,' addlebrained housewives bake swastika-decorated cakes, and
hate-filled brown shirts march along American streets. Unfortunately,
these people are real."

Yahoo! Movies: The California Reich
http://movies.yahoo.com/shop?d=hv&id=1800043428&cf=info&intl=us

Info on the film's cast and crew:

Internet Movie Database: The California Reich
http://imdb.com/title/tt0072757/

Used VHS copies are available:

Amazon: California Reich
http://www.amazon.com/gp/product/offer-listing/630021480X/ref=dp_pb_a//104-8416173-3073508?condition=all

My Google search strategy:

Google Web Search: "california reich" cake swastika
://www.google.com/search?hl=en&q=%22california+reich%22+cake+swastika

If this is not the correct film, please request clarification; I'll be
glad to offer further assistance before you rate my answer.

Best regards,
pinkfreud

That's the one! Talk about a real horror movie... 
Thanks.