Dunno how I stumbled on this thread, but I might as well chuck in my two cents. John's question is not a bad one. The Germans certainly had the technology that, had it been applied in a more cohesive way, could have had a more positive outcome for the Nazis. Thankfully, their own approach let their side down, though not for lack of trying. At the outbreak of WW2 the Germans had the best and largest aerial reconnaissance capability in the world, and with its development and use of radio navigation and bombing aids, potentially the most accurate bombing force. Both these capabilities were squandered during the Battle of Britain and the Blitz. The use of navaids for bombing out the centres of cities like Coventry were a waste of a superb capability - the RAF would not adopt such sophistication for another couple of years after Coventry, and it didn't take the British long (in the scheme of things) to come up with a deterrent, but this didn't detract from how clever the German equipment was. Had the Luftwaffe been more succinct and targetted industrial sites from the outset, the results might have had a far worse impact on the war for the British.
This is where reconnaissance comes into the picture. The German resources that Theodore Rowehl and Canaris of the Abwehr had assembled was very effective, including having overflown and taken photographs of just about every pre-war military installation in the country, but Britain's use of radar meant that anything entering British airspace was able to be tracked almost immediately, intercepted and shot at. Putting it succinctly, during the Battle of Britain and the Blitz, the Germans had little opportunity to quantify the results of their bombing raids, which made determining how well they were doing very difficult. This meant they had to rely almost solely on what the bomb aimers and pilots were telling them to gauge their raids' effectiveness, which naturally allowed for error, and gave an uneven and inaccurate picture of the strategic situation. Obviously, there were breakthroughs that meant aerial recon assets got through, such as the quest for speed and altitude - the Ju 86P and the Ar 234, but ultimately fixes for these were found with high flying interceptors and in the Arado's case, ending the war (!), but jet interceptors were around the corner in wartime Britain by 1945.
The denial of the use of aircraft over Britain throughout the rest of the war, with a co-ordinated and effective air defence network in place against them, as well as the dawning realisation that neither the British, Americans or Russians were going to relent as the war wore on led the Germans to take a different approach, hence the V weapons. There was little the Allies could have done to prevent the V 1 and V 2 campaigns that they historically didn't do. The V 1 and V 2 programmes were set back by bombing and interdiction campaigns throughout their development. The V 1s could be caught in flight, but their biggest problem was that they were terribly inaccurate and it is arguable that they consumed resources that should have been spent elsewhere and that this meant the whole V 1 campaign was a waste of time, effort and resources with little practicable result for the Germans. The same could be argued regarding the V 2 campaign, but for the fact that it was unstoppable once launched and was truly an advanced terror weapon with enormous potential. Again however, the use of resources dedicated to the programme certainly advanced technology - the V 1 could have been designed and built by any country with its own aviation industry - it was not very advanced, but militarily the V 2 campaign was misguided for several reasons, not least was that by the time the V 2 offensive began, Germany had neither the resources nor the time left to launch an offensive with weapons that might have resulted in an outcome it sought, in hindsight of course.
Technology was not the Germans' problem, it was the attempted attaining of unachieveable strategic goals - see Ops Sealion and Barbarossa, for example, and the material waste that these entailed, as well as a general underestimation of their enemies. The one thing we can be thankful for is that the Nazi hierarchy was what it was; there was much infighting, currying of favour and general lack of knowledge of the strategic situation for various reasons. This all induced a level of chaos at a managerial level that meant that focus was lacking and those who knew better of a lesser rank were ignored.