If you could go ANYWHERE in Germany for Xmas...

Why not somewhere in Italy that the pass covers like Venice or Bolzano

Venice is quite far for such a short trip. We used the pass to go to Innsbruck last year.

We don't want to spend under 6 hours in transit.

Sorry I misunderstood your post I thought you were using the pass to kinda hip hop around in a certain direction to end at a destination to spend Christmas. I assume now it’s to take little trips here and there? Most of your ideas look to north Germany and I have not been there yet so I cannot comment on those, but I’m sure where ever you end up it will be wonderful.

Well, to me Dresden sounds like the best idea. This is the region where all the handmade wooden Christmas ornaments you see on every German Christmas market come from, and you could learn a bit more about the meaning of nutcrackers, candle arches, pyramids etc. (all related to mining). And, it's cheaper there. Moravian stars come from a village to the east of Dresden, and they have their own local gingerbread, made in 7 or 8 small gingerbread bakeries all year round in a small town next to Dresden (try the "Spitzen"). And in Dresden you must try the Stollen of course, ideally from a small local bakery.
From Dresden you could do day trips to Meissen (picturesque old town with a castle), Bautzen (Germanys oldest Christmas market), Görlitz (probably Germanys most beautiful town, and a Christmas market with a Silesian twist), or Freiberg (historic mining town in the Ore mountains). And if you are serious about shopping Seiffen, a village deep in the Ore mountains where all the wooden Christmas ornaments are made and sold all year round, is a must, although it's difficult to get there by public transport.
PS: and on weekends you can experience miner's parades or Mettenschichts...

I’d second Dresden- a historic city with a very nice market.

Getting away from the unmanageable crowds of Nuremberg, I’d visit the smaller Christmas mart at Maximilliansplatz in the UNESCO city of Bamberg. Little Venice, Rauchbier, bratwurst, strudel and beautiful medieval city.
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Third vote for Dresden.

When we lived in Munich we visited the Christmas markets in Nuremberg, Salzburg, Regensburg, and Dresden and Dresden was the only one we went back to more than once.

We just liked the vibe, layout (didn’t feel as crowded as Nuremberg) and the quality of the items. Plus the city is quite nice.

DJ

Regensburg: We visited in summer not long ago, but my friend who went to university there is trying to push it on us. Maybe there's somewhere interesting nearby to visit as well?

Landshut, Straubing, Kelheim & Weltenburg (better in summer, but well worth a visit in winter too).

NRW state has a lot of interesting Christmas markets in various styles. Their tourist website can help you to explore: https://www.nrw-tourism.com/christmas-markets

I would vote for that area because you will find a lot of locations close to each other to optimize experience versus travel time.

Extra tip: For sure one of the markets with most festive amosphere is the one in Goslar:
https://www.weihnachtswald.de/welcome

Anywhere in Germany? For cities...Dresden, Berlin. Meißen.

For small towns...Lüneburg, Weimar, Naumburg an der Saale

I visited Erfurt for the first time and for the opening of the Weihnachtsmarkt this year. I was impressed not only for the multiple Weihnachtsmarkt, but how most of the Altstadt participated too. You got a little bit of everything good café, Thüringer Klöße and Glückliche and 500 year old buildings. Many friendly folks and the tourists. We stayed at a Fewo for two nights in the older "modern" part of town and it was great. A bit of the old East but a good bit of the Erfurt culture. The public transportation was also top. Good Stollen too. Not sure what else you would like to see in the surrounding area. My favorite place would be in the mountains with snow. Those areas would most likely be outside Germany this December, but Mittenwald, Obertsdorf, Berchtesgaden and surrounding regions.

While I love Bavaria, today I'd prefer to spend one more Christmas in Obergurgl, Tyrol. Otherwise it would probably be Bad Windsheim, Nordlingin, or Ansbach. (Amazingly Ansbach is the largest of all of these, but I've never run into tourists there.)

I would recommend a cluster of towns in or near Thuringia, Saxony and/or Saxony-Anhalt. My favorites have been Göslar, Quedlinberg, Wernigerode, Dresden, Leipzig, Erfurt and others. I hope to get to Gorlitz someday. The former east is a fascinating area to visit, especially at Christmas time. You will find good local celebrations and customs. There are more possibilities for items made in Germany rather than China. The buildings of these historical cities are a stunning backdrop to the food, drink and craft booths.

Wonderful advice everyone! I'd independently come to the conclusion that Dresden made a lot of sense. We're going to stop in Erfurt to visit the market on the way there and Leipzig on the way back. I realize this isn't enough time to properly "do" any of these places, but it will give us a taste and we'll get to visit some fantastic Christmas markets!

Time to pack!

Good choice. I was going to advocate for Dresden myself. I have not been yet, but my son studied in Germany ( Berlin) and then did a praktikum somewhere in eastern Germany, near the Saxon Alps. Dresden was his favorite city in Germany; he spent nearly every weekend there.