Having belatedly read The Secret Horsepower Race, apparently German engines were not getting the maximum boost possible out of their existing fuels (especially C3 but even B4) for most of the war due to those issues.
Main benefit of C2 was that it would not have reacted with fuel tank lining or got into the lubricating oil the way C3 initially did due to its different chemical composition. So the DB601N might actually have worked.
Yes, reading and understanding the detail in TSHR by Calum Douglas is the most accurate way to relate the German problems with their engines, and some of their aircraft decisions as well! Most of the German problems were basic resource issues, fuels and metals.
So, the DB 601 N was a successful upgrade at the time, but that upgrade was only ever a short-term improvement for the DB 601 A and used in the late Bf 109 E and some Bf 110. The slightly late development of the DB 601 E then forced the DB 601 N to be used in the Bf 109 F1/F2 and the problems with long-stored "C3" (as it was at that time), the rubber fuel bag-tank contaminating the fuel and the oil dilution problems, combined to cause big problems. But that was just the start of it!
Eng