Anyone remember this movie?

There's a particular movie back in the day that left a lasting impression on me as a kid.  I'm a bit rusty on the story, but the basic plot (from what I can remember) was about a toy factory that made whimsical toys that became taken over by a militaristic madman, with a war breaking out in the end over who should continue the the factory.  Overall it did pretty poorly in the box office, but to me it had this great underlying cautionary tale.

I know its random, but I just wanted to point out one tiny detail about the movie, and how it applies to today.

There was a huge outbreak of shooting games in the past decade.  Last year was probably THE largest year for FPS games, with titles like Bioshock, Call of Duty 4, etc.  I remember back before this movie came out, that there were hardly any "war simulator" type games on the market.  Now, they're seemingly everywhere.

I bring this up because with the upcoming title Dead Space, violence and gore is just now part of the game.  Everyone plays shooting games, and the thrill of mercilessly killing your opponents is all part of the fun.  I find it kind of foreboding that the story's tale of purity over violence is now a pre-gone notion.  Why is it that we enjoy these kinds of games?  Is it something deeper, perhaps the male hunting instinct that lies dormant within us? 

Are we perhaps a people of militaristic whims, and Toys was a self-fulfilling prophecy..?