I have to be honest, if it were me, I would push the time out as far as I could so they would be a little older and a little more likely to remember the trip.
At 5 and 8 they'll remember the trip easily. My children have been travelling since babies and they remember pretty much most of the trips from the age of 3 (the earliest they recall). Besides, it's not all about memories but enjoying life at the time, why wait for some arbitrary age just so they might recall the entire trip when they're older?
Personally most Christmas markets quickly begin to look the same so a whole holiday centred around Christmas markets would rapidly become a drag. Summer in Germany is so much better than the winter and that goes for pretty much of Europe unless you're into skiing or other wintersports.
Even in the warmer climes such as southern Spain, whilst the weather will likely be sunny and warm there won't be the opportunity to enjoy the beach and waterparks will be closed which will be very frustrating for the children.
Your children are still at the age where play is still a big part of their lives. Whilst museums, markets and old cities, towns and villages may be interesting it will soon wane and they will want to be playing whether it's parks, pools, beaches, theme parks or water parks, all of which will be impossible or dismal in the winter. We've spent several trips to the Costa Del Sol and Mallorca in the winter but we've stayed in resorts with heated pools. The weather is typically in the higher teens so it's fine for lounging round a heated pool and walking around in shorts and t-shirts but we're there for a relaxing break with the occasional day trip or daily visits to local restaurants with the rest of the time hanging around the resort, yours will be a different holiday so your requirements will unlikely be the same.