You're not the only one who missed that. Famous critic Roger Ebert didn't get that either.
It's an okay explanation to pull Ilsa into the 21st century (Kroenen of course, is immortal thanks to his clockwork insides), but if the movie had had more time, I'd have preferred them to be cryogenically frozen, as a nod to the comics. I think it's such a wonderfully "pulpy" idea, frozen Nazi's! t: