Source: H. Graetz, History of the Jews, volume II (Philadelphia: Jewish Publication Society of America, 1893) 331.
"Jochanan ben Zakkai, the head not of the State but of the community, appears to have acted as a shield from a political point of view. His kindly and gentle disposition, in which he resembled Hillel, he displayed even to the heathens. It is related of him that he always greeted them in a friendly manner. Such friendliness offers a striking contrast to the hatred felt by the Zealots towards the heathens, both before and after the revolution, which increased after the destruction of the Temple. The verse (Proverbs xiv. 34), 'the kindness of the nations is sin,' was taken literally by the people of that time, and was especially applied to the heathen world. 'The heathens may do ever so much good, yet it is accounted to them as sin, for they do it only to mock us.' Jochanan alone explained this verse in a sense expressive of true humanity: 'As the burnt-offering atones for Israel, so mercy and kindness atone for the heathen nations.'"
The NRSV translates Proverbs 14:34 to say, "Righteousness exalts a nation, but sin is a reproach to any people." You see that verse on the inside covers of Gideon's Bibles. The phrase in question is the one translated, "but sin is a reproach to any people." Literally, it reads "mercy to nations sin." The word translated as "sin" is "chatat," which can refer to a sin or a sin-offering. So one group is taking the passage to mean that God accounts the Gentiles' mercy as sinful, whereas another interprets it to say that the Gentiles' kindness is a sin-offering, which makes atonement before God.
I wonder what the verse means in its original context. Is it saying that nations should be righteous rather than showing mercy to the nations--kind of a justification for the Conquest? I don't know.