[mookiemookie]

The Laconia incident should be mentioned. Not for it's value as a sinking, but more for its importance in what it meant for the overall course of the war as it led to the Laconia Befehl (take no prisoners, offer no assistance, etc).

From the standpoint of the sinking of a target of military/propaganda importance, I'd go with the Royal Oak, Barham, or the sinking of the Courageous in '39. Royal Oak showed that even Scapa Flow wasn't safe, the Barham showed the vulnerability of capital warships to submarine attack, and the Courageous was a blow to the U-boats most hated enemy, the airplane.