Christmas tour

Nürnberg is a good place to stay a few days, if only because Würzburg, Bamberg and Regensburg are all within one hour on frequent trains. Nürnberg is some 2,5 hrs from Frankfurt airport and about 1 hr from München.

I loved the Christmas markets in Alsace (Strasbourg, Colmar). The medieval market in Esslingen (near Stuttgart) was very special too. If you start in Strasbourg, you could stop in Stuttgart for a night or two on the way to Munich.

For Christmas markets I'd have to agree with tonfromleiden, but I'm partial to Bayern. Regensburg would be my recommendation from Nürnberg.

Nurenberg is always recommended because it's the largest Christmas market in Germany, however, I've been there 3x and think it's way too crowded for my enjoyment. Plus, if it rains, it's a see of umbrellas poking at you from all sides. I prefer Regensburg and Bamberg. And if Rothenburg ob der Tauber isn't on your tour it's a favorite during the holidays. While in Munich, check out the smaller Christmas market in the Schwabing area. Unique handcrafted 'artsy' items by actual artists; different from the market in the Marienplatz.

Nurenberg is always recommended because it's the largest Christmas
market in Germany, however, I've been there 3x and think it's way too
crowded for my enjoyment.

Nuremberg isn't the largest, with just 180 stalls. There are a few Christmas markets with more than 200 stalls and twice as many visitors. Nuremberg is just the most famous one because of the status before WW2, when Nuremberg was Germanys most beautiful, and most German, city. But today you can find better ones. My favorite is Erfurt. 200+ stalls, but unlike all other large Christmas markets on a preserved town square:
http://3d-top-event.info/weihnachten48Weihnachtsmarkt_Erfurt.html (click on panorama #3)

The "Best of Munich..." tour has you in Germany for around 48 hours, much of that time in alpine towns and very little in Munich. I'd say at least a full day on your own in Munich is warranted, maybe longer depending on your interests. I agree with checking out Bamberg, Würzburg, Nuremberg, and/or Regensburg as well. Nuremberg's Christkindlmarkt can indeed get quite crowded.

Nurenberg is always recommended because it's the largest Christmas market
I'm afraid my recommendation was not for the city having a Christmas market, large or small. It's a matter of taste, but I find them sorry exercises in artificial cosiness.