But Czerniak mentions nothing about them either staying in Palestine or escaping from the Nazis. This, compared to his noting of similar material about the personal history of other players in his book: he notes, for example, on the same page, that the winner ,of the tournament, Moshe Blass, was not on the Palestinian team for the 1935 Olympiad because he was considered an illegal immigrant by the British authorities in Palestine.)
Either he knew nothing of their fate (Czerniak, like many stronger players, sometimes seems to have had a bit of a "blind spot" toward the fate, or even existence, of that subhuman species, "weak/non-players") or else they simply did not illegally remain in Palestine at all.
So much for my research of the original papers from the period discovering an "unknown scoop"! Ah well, at least, if not new, this story is "old enough to be new" (to quote Napier) -- even "old timers" I have asked in the Israeli chess "scene" had never heard of it. But still, the mystery remains: who were these brothers and what was their fate?
It should be noted that, while two brother being notable chess players is not common, it is not unknown, e.g., the Steiners (Endre and Lajos), or the Laskers (Emmanuel and Berthold). (As usual, Edward Winter has the goods -- see e.g. Chess Notes 4808 or 4515). So, it's certainly possible that the brothers, if not strong players, were indeed the two strongest Jewish players in Luxemburg, there being only about 1000 Jews in the country at the time (according to Wikipedia).
Merely being from a country that is very small, or weak in the chess field, is hardly a sign of fraud or ulterior motives of the players who come to play representing that country; many countries whose chess level is, objectively, terribly low, legitimately take place in the Chess Olympiad and play the world's best players -- even if they are crushed. After all, as Wittgenstein noted in a different context, the weak chess player plays chess no less than the strong one does.