I cannot remember all the details, such as thickness or how the leather was coated or faced, but it was used instead of rubber which was almost impossible to get in the later years of production.
I'm sure that when the 262 was under development, despite of it's design advances, was to have raw materials for it's components much like any of the other luftwaffe aircraft. As we know, the furtunes of war turned against Germany hard, forcing them to make compromises and trade-offs, and the leather liners in the fuel tanks was one of these instances.
I'm not sure how many other aircraft were given the leather liners during the later stages of the war, but I was told by a friend that the local citizens would seek out abandoned aircraft, and strip the leather from the tanks. I never asked what for, but I'd assume shoes?
And I agree Bill, perhaps the word "flaws" wasn't right in this case...I shoulda said weaknesses...
As for the leather breaking down and contaminating the fuel supply, I'm not sure how that was approached. The leather was (I'm assuming here) faced inwards? Or just kept in service for a certain amount of time before the fuels broke the leather down. Although I have seen leather used as gasket materials on older vehicles, so I'm not sure how long the liner would have held up with constant use.