The Me 264 and 364 were fast aircraft, both in cruising and at penetration speed. Engines would continue to develop to maintain a speed that allied aircraft would find challenging.
German reconnaissance aircraft had "hohtenweil" radar. They could detect a convoy at 150km and ships at 100km. They could detect fighters at that distance as they took of from aircraft carriers.
Intercepting Bombers mid Atlantic is not going to be easy. The bombers would be routed around aircraft carriers or picket ships.
Dive bombing became irrelevant in 1942 when the computing bomb sight the Lotfe 7 came into service and the shallow dive bombing sight the Stuvi 5B with BZA computer. Both could achieve about the same accuracy. It became less relevant earlier than that due to the vulnerability of dive bombers outside that of a tactical setting. The Me 210 was incidentally the replacement for the Ju 87, Ju 88 and Me 110.
The Luftwaffe did not turn London into rubble, or Birmingham, Bristol, or Coventry. It did not pursue a campaign of bombing housing as Britain latter did with the Area Bombardment Directive. (Demoralising the German population by dehousing by bombardment of the geometric centre of a city without use of a specific target)
Destroying housing became an act of retaliation, most prominently in 1944 with the V weapons which were intended to force a negotiation between Britain and Germany for a mutual end to city bombing.
Nevertheless the Luftwaffe was prepared to cause massive collateral damage to residential areas around targets (housing often abutted factory walls) to achieve the goal.
The Targets for the Luftwaffe were ports, docks, electrical substations, oil depots, machine tool factories in the 'shadow aircraft factories set up around (Coventry, Birmingham) etc. Air or Land mines were just dropped to mine harbours but self destructed if they hit land.
The need to expand bombing against Germany (Britain only way to get back and the further need to justify the Area Bombardment campaign lead both the British government to emphasise propagandistically the Luftwaffe as conducting a terror campaigned. Hence if a He 111 accidently bombs London, causing no damage, it was justification for a raid on Berlin. Hence Rotterdam, Guernica, Docklands etc all justified British bombing at night (they had no navigation aids initially and had were beyond the radar horizon)
The Switch from bombing RAF fighter bases was a sensible decision that was suppose to support the U-boat campaign.
The decision to stop bombing British airfields was made in the fog of war.
We could maybe emphasise the Luftwaffe lack of the following:
1 No Drop Tanks for Me 109
2 No Drop Tanks for Me 110
3 No high speed unarmed recon version of the Me 109 to obtain photo reconnaissance.
4 No long range escort or high speed recon such as a DB601 powered Fw 187.
5 No long range maritime reconnaissance bomber such as a Ju 89 or Do 19
1, 2 and 3 would have been easy to achieve.
4 was actually flying earlier than most French fighter such as the MS407 and DW520
5 was actually flying as well in 1936
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