I've talked about this on other forums, and the "answer" is pretty much, "some people will be offended, some won't be".
Some reenactment groups don't allow medals, some encourage them. Civil War groups tend to have no problems since, well, the Civil War was quite a long time ago and it's pretty immediately understood that they're trying to re-create history.
I know that's not very helpful, but it's still a grey area of discussion for groups reenacting WWII and later.
Personally, I would not use real medals, and I might make very slight changes to the replicas I made - that way no one can say I'm wearing something I'm not entitled to or anything like that.