Well I can't say about what the Nazis thought but I was always under the impression they thought we culturally would fit into their world but also would be less racially "pure" than them and inferior to Germans but again I'm not certain really.

But with regards to the differences between then groups is mostly geographical and time based, they all just moved about allot, so like the Saxons took England from the celts after their lands got colder (I think), and their neighbours started pushing in as, their neighbours and their neighbours neighbors started pushing into them. So they moved over to England in bits and bounds and then eventually the Danes had a similar situation and they came in and took the north of the country, and then eventually the Normans who also came originally from scandanavia but had settled in northern france and then they took over. 

But predominantly it was just culture and power changes, and interbreeding rather than like a wiping out. So we all a bit mongrel...or at least to Nazis we are.

Though I'm quite happy with sharing my genetic history with most of Europe, it's pretty cool.