German Rail Pass covers Munich <-> Paris?

Reading the fine print, looks like no go. If you want to lock yourself in, you can get a round trip FRA>PAR for 118 Eu each. If you really want to jump through hoops, I can see 98 Eu each, by buying one way to Paris from DB and the return from TGV.

A German Rail pass would only cover your travel by rail to the German border (or the last station the train stops at before the border). For an overnight train between Munich and Paris, you would also need to purchase a ticket between the German/French border and Paris, and you would also have to purchase a "reservation" for the type of sleeping accommodations you want. A night train ticket consists of two parts, a rail part - you must have appropriate tickets to cover the entire stretch, in your case a pass for part of the way and a point-point ticket for the rest - and the accommodations. You pay for the accommodation for the entire route (since they wouldn't re-rent the compartment to someone else). Before purchasing the rail pass, consider your rail options. With the pass you have the cost of a day of the pass, plus the point-point ticket, plus the cost of the accommodations. You might be able to purchase a complete (global) ticket including everything directly from the Bahn. With advance purchase (although you've maybe waited too long) you might get a discount ticket for less than the pass option. For each way, the Global price (full fare) for two persons in an Economy Sleeper is 397€, but right now I see an advance purchase Europa-Spezial fare from the Bahn of 198€. The Aufpreis (supplement or "reservation" fee) for a double sleeper with a pass is 140€. To the Aufpreis you have to add a day of the rail pass plus the fare from Germany to Paris. I would first try to determine what advance purchase fare you can get without a pass before committing to the rail pass.

In fact, if your other travel in Germany is going to be mostly in Bavaria, you might do better with a combination of Munich metro day tickets and Bayern-Tickets (day passes for regional trains in Bavaria) there, and point-point advance purchase tickets for your side trip to Paris.

So - another question: If we make Paris a side trip, are ADVANCE reservations required for Paris or can these be made the day of travel?

You can always go anywhere you want (providing the train isn't sold out), but you have to pay full fare. Its just like airline tickets. Walk up to the ticket counter one hour before the flight, and they will sell you a ticket for $500 that you could have bought last week for $200. The fares I quoted earlier are advance purchase, not day-of-departure.

Reservations for night trains can and do sell out well in advance, so your chances of getting on the train, let alone your preferred accommodations, would not be good if you wait until you are in Munich. As for pass holder reservations on day trains (ICE, TGV), in Germany, reservations are not required, but would be desirable for that long a trip (you could board the train without reservations but don't want to stand that long). In France, pass holder reservations are required for trains like the TGV, and French Rail limits the number of such reservations. You could find that seats reservations only are no longer available when full fare seats are still available. On the other hand, with advance purchase, you can get a ticket with all required reservations in France and, for an additional 4€/seat, reservations for seats on the train in Germany. For Oct 18, I just saw tickets with full reservations for two people from Munich to Paris for 118€ (plus 4€ each for the optional German reservations).