I've traveled extensively for Christmas markets so I'm taking this into account:
1) Berlin. Over 50 different Christmas markets, so it's a must, but even without the Markets Berlin is my favorite city in Germany.
2) Stuttgart. Wouldn't put my adopted city 2nd in any other month, but we have the best large Christmas market in Germany, and the neighboring town of Esslingen has a medevial Christmas market which is my favorite, period. Ludwigsburg has one of Germany's finest Baroque palaces and has a very elegant Baroque Christmas market. Stuttgart also has a lot of great museums and is off the radar of American tourists.
3) Prague. Again, top city no matter what, but even more magical in Christmastime. Easily reachable from Germany and just an amazingly beautiful city.
4) Munich. Museums, markets, very different culture from other parts in Germany, great in the winter. Easy to day trip there to Nurnberg, Augsburg, and Regensburg which are all worth a visit.
Honestly for a 2 week trip, basing yourself in 4 cities and then using them to day trip would keep you more than busy. You could even drop a city.