Yup, it's a well known incident and illustrates that not all U-Boat commanders behaved like heartless Nazis 24 hours a day. It's also not what one might describe as one of the United States' finest hours, then again, that's what happens in wartime.
I think perhaps the US Bomber pilots might have shown a little better judgement, there are some pictures in existence of the U-Boat with people on deck, with what are clearly lifeboats under tow, visibility is good too, so it's fairly apparent what is going on. Still, who can say what they would do under the circumstances? It's easy to be judgemental when sat in a nice warm house at a computer fifty years later.
Chock