Our own intelligence agency is so biased against Muslims that it completely (and apparently wilfully) ignored the existence of a domestic neo-nazi group that murdered and bombed several "foreigners".

It's culturally acceptable to be "critical of Islam". Though the middle-class right-wing party ProNRW "only" received 1.5% of all votes in the last regional election, fundamentalist Muslim groups like the Salafists get plenty negative media coverage and the tabloids routinely run articles about those evil scary people.

I don't think the US has any reason to doubt Germany's willingness to pursue Muslim extremists.

EDIT:

To give you a quick impression of the German zeitgeist:

Most Germans are not aware of their status within the EU. Although we do complain about having to bail out other EU members and are proud of our industry most people merely boast about these things without realizing how far ahead we are.

The reason many Germans are critical of the EU these days is almost entirely the financial meltdown various EU members went through in the recent years. We don't feel about the EU the same way we feel about our country, but we feel a lot closer to Europe than to anywhere else (except for the US and Canada).

As far as I can tell most Germans think of Canada is the friendlier, cleaner, backwater sibling of the US. The general idea also seems to be that it's a great place to emigrate to because it's full of Germans (which of course isn't entirely accurate).

Germans generally think that the German government is pretty oblivious towards its citizens outrage about the NSA surveillance, but most Germans don't give it much consideration either. Except for the tech-savvy, nobody seems to really believe the NSA is actively looking (or even passively scanning and recording) their data.

I would say that most Germans generally think that while relations between the US and Germany (or the EU in general) have seen better days the two are still very closely tied, or at least as closely as Germany and France, and definitely closer than Germany and Russia (because a lot of Germans grew up during the Cold War and conflate Russia with the Soviet Union like Americans frequently do).

The tech-savvy crowd is split.

The start-up world mostly seems to have no problem relying entirely on US companies for their infrastructure. I would say those who are concerned about their users' privacy are similarly represented as "greens" were before "being green" became mainstream.

Big corporations mostly don't honestly care, but some see the publicity as an opportunity to make more money by catering towards those seeking some level of privacy. The result is more about marketing that about actually solving real problems, though.

Oh, and as for Israel: saying anything bad about Israel still is the easiest way to be branded an anti-Semite and Germans care a lot about not appearing anti-Semitic. There is some concern for Palestine, but that's mostly fuelled by far left-wing (and, less noticeably, far right-wing) parties. I'd say Germans are less unquestioning about Germany's allegiance to Israel, but it's generally seen as a historic duty than honestly agreeing with Israel's politics.

Disclaimer: I'm a software developer in Germany. I have a lot of friends and acquaintances who are much less interested in technology and politics than I am, but my appraisal of the cultural zeitgeist is still probably not 100% accurate (it can only be a snapshot anyway).