There are TWO questions here:
- how do I display it? (shadow box, mannequin, etc.)
- should I display it?
1st question: be overt about showing it within its movie context:
- in shadow box/frame, shown flat for best effect
- with a couple good stills from the movie to 'explain' where it comes from
- small plaque that names movie, prop, etc
All nicely matted and framed out--you'd have a movie prop that is historically disturbing (similar to all the various Nazi-inspired displays, uniforms, props that some have)--BUT that also 'lands' it in a movie context.
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2nd question: people collect real war artifacts, or historical movies props: WWII, Roman gladiatorial items. Some replicate torture implements--Freddy Kruger, Hellraiser, & so on. I don't understood the fan base for Star Wars Imperial costuming--they were that galaxy's 'stormtroopers' and oppressors. But different people get excited about different aspects of movie collecting, costuming, etc. You can dress as Jason or Freddy or Darth Vader--and it doesn't mean you're that thing.
Yet, I think to display a Klan hood is disturbing and complicated. If you're not a racist or a white purist--you could certainly run into misunderstandings surrounding the display of the 'prop'. That's why I think it's so vitally important to show it IN CONTEXT within the movie.
This hood is SO iconic. It's as negatively iconic for me as a Nazi swastika. So while I can suggest ways to display it as a prop, as a symbol for fear and hatred (which for me it is), I would never want it in my house.