The fuel limited the amount of boost that could be used, but was not the source of the high altitude issues.
All of the German engines that saw widespread service had single stage superchargers. With a single stage supercharger the pressure ratio that can be achieved is limited. At high altitudes their superchargers couldn't give enough boost to maintain power. There were several projects for 2 stage superchargers and turbocharged engines, but I don'tthink many, if any, saw service.
The major German engines: BMW 801 and Jumo 211 had two speed superchargers by the time the war started while the Merlin, Allison had only one.
The DB600 series was not so dependant on its supercharger: this engine used a compression ratio of up to 8.5:1 compared to levels below 6.4:1 for the Merlin.
High compression ratios provide for high power, high efficiencies. This means the engine needs less boost and so a single stage supercharger will provide sufficient altitude compensation.