(DB rail pass) Just looking for someone to confirm what I think I understand

For Cologne to Krefeld and back, you can use an NRW day ticket for up to 5 people for 45 EUR. There is an hourly direct regional express train between them. Travel after 9 am week days, or anytime weekends.

Luxembourg is allowed with the GRP if you use the IC bus. It stops in Trier if you want to travel by train from there, otherwise it continues to Frankfurt and you can travel by train from there.

Since the difference between a 4 and 5 day Twin pass is only 21 EUR, so that would be better than using an NRW day ticket for a round trip Cologne to Krefeld. I would not go out to a 7 day pass, as it is 82 EUR more than a 5 day. For one more short-range trip, a point to point ticket would be less.

Luxembourg - Rothenburg would be almost a ful travel day, so I like the idea of breaking off it in Cochem or Koblenz. But then the first leg is a matter of local transport and probably not worth a rail pass day. Likewise, Rothenburg - Munich can be done using local trains. You will lose 30-40 min but could do it for €31 for the entire family (free public transport in Munich for the rest of the day included) and you could do an intermediate stop in, say, Augsburg). That leaves you with four "long distance train - days". Now, I'd compare saver fares against pass costs. Saver fares lock you into a specific train but since you will pre book your accomodation anyway, a rail pass may give not tremendously more flexibility than point to point tickets. Koblenz or Cochem to Rothenburg is available for €29.90 pp right now. There is a transfer to regional transport in Würzburg, so you could take your time to see Würzburg for a couple of hours (local transport after an ICE ride is never train specific). Prices for direct ICE's from Munich to Köln start from €67.80 pp (there are slightly cheaper and slower connections with a transfer in Mannheim, which follow from Mainz the scenic Rhine route); public transport to your hotel can be included if you indicate as destination the address of your hotel. Tickets for Köln - Luxembourg are available from €19.90 pp. That totals roughly to €300 for all (€31 Trier-Cochem/ Koblenz, €60 Cochem - Rothenburg, €31 Rothenburg-München, 136 München-Köln, 40 Köln-Luxembourg). What's your price of a four day twin train pass plus cost for public transportation?

I want to point out that if the German rail pass is in your sights, you should wait a little. Normally there is a sale that comes up on or around October 1 and you can save around 20% (non-refundable however) on certain rail pass plans. Here is an example of last year's sale from one of the rail pass resellers. (DB of course sells these promotional passes as well and at a lower price.) You should wait a while anyway if you're buying a pass at the regular price. If something comes up in the next few weeks and you can't travel, the refund fee is still pretty stiff. Purchase can be postponed until you're in Germany for the normal-price GRPs - they're sold at most big airports and big train stations.

Your trip is around 2 months out right now. Saver fares are a pain if you want to change your plans (or something changes them for you.) They're normally subject to refund fees - and if you re-purchase later on for another day for example, you'll probably pay a higher price (and have some refund procedure hassle.)

"Now, I'd compare saver fares against pass costs."
Doing the math is a worthwhile exercise. But it's an apples-to-oranges comparison as there are other considerations besides the up-front price.

I'm helping a train novice who is getting around Germany right now on p2p and local/regional day passes. She bought a Bruges - Cochem saver fare at a good price. She had scheduled a 5-hour stopover in Cologne. But once in Cologne she had some crucial personal issue and decided she needed to get to Cochem immediately rather than take the scheduled IC train scheduled for later. She went to a ticket counter and paid an additional €31 to make the trip earlier. (She could have gotten there for around €21 but as a novice, she didn't realize her original ticket would still work for for part of that trip.)

The same person, after her stay in Cochem, was headed to St. Goar for a few days there. (She had bought a local 3-day pass for regional trains for this trip, and this was Day 1.) In Koblenz (where she changed trains) she mistakenly boarded an IC train that was using the platform of the same number at the same time as her intended regional train. Oops. That long-distance train took her well past St. Goar and all the way to Mainz before stopping. Her 3-day pass was useless for this journey, and once in Mainz, it was useless again for the trip to St. Goar (for which she now needed to buy an additional €12.50 train ticket.) I have not yet heard whether she was penalized for riding the train to Mainz with no ticket - but that is the standard consequence when you board a train without a valid ticket. I think it's still a €60 fine.

The same person decided (because of the weather) during her St. Goar stay to revise her travel plan to venture on a longer trip outside the zone of her 3-day pass. This had to cost more as well of course. I'm awaiting her report.

A German Rail pass used on the days in question would of course have been cost-free and fine-free. And even though you have plans, things happen... like illness... or you find out later about a must-see event that comes up in some other place than where you booked... or you fail to heed or understand all the time and travel-zone limitations that come with your day pass...