But the party's leader insists he is taking his National Democratic Party mainstream.
"My aim is to make the NPD a party firmly based in the present and looking toward the future," Holger Apfel said in an interview at the rally. Breaking a far-right taboo, he told The Associated Press that Nazi Germany's record during World War II included "crimes."
Apfel has tactical reasons for toning down his message: Authorities are currently considering a ban on the party. Yet the attempt to appeal to the center has prompted anger in the country's small but entrenched ultra-right movement, where many refuse to acknowledge that Germany under Nazism—or National Socialism—was responsible for the slaughter of 6 million Jews. Some NPD members have left; others threaten to do so.
Despite talk of change, it doesn't take long for Apfel to show his own flashes of hardcore xenophobia, which extend to seeing a threat to the "biological basis" of the German people.
"We ... have to ensure that Germany again becomes the country of the Germans," he said. "We see the growing danger that the biological basis
He frowned when asked his feelings about the success of Marcel Nguyen, a half-Vietnamese gymnast who won two silver medals for Germany at the 2012 Olympics.
"I can freely say it's not something that causes me euphoria," Apfel said, before hastily adding: "But you won't see us calling for the deportation of half-breed children."
Signs ordered reporters at the NPD's summer festival in Viereck not to take pictures of stalls selling extremist books, CDs and pamphlets. A large poster at the entrance to the booths compared the rising number of foreigners in Germany to the shrinking number of ethnic Germans.
The government's decision to weigh an NPD ban follows the revelation last November that a small neo-Nazi cell carried out a seven-year killing spree which left nine immigrants and a policewoman dead.
Authorities haven't been able to prove that the cell operated with direct support from the NPD. But key party officials have been linked to the group's three core members, who managed to evade police for over a decade despite being on the run for other crimes.
Angela Merkel considers the NPD "anti-democratic, xenophobic, anti-Semitic and therefore also a threat to the constitution," the German chancellor's spokesman, Steffen Seibert, told reporters. But a previous attempt to outlaw the party was rebuffed by the country's top court in 2003 and officials are treading carefully before deciding later this year whether to launch a new bid to have the party banned.
Apfel's appeal to mainstream voters runs parallel to the emergence of several new German ultranationalist fringe groups on both sides of the NPD.
One calls itself "The Immortals." It has staged apparently spontaneous nighttime marches in small towns, protesting what it regards as an excessive influx of foreigners threatening the racial purity of the German nation. Chilling videos showing dozens of people wearing white masks and carrying burning torches have been uploaded to YouTube.
Despite their sophisticated online presence, The Immortals play a minor role compared to the so-called Autonomous Nationalists, according to Toralf Staud, a German journalist who has written extensively about the far right. In August, more than 900 police officers raided homes and clubhouses belonging to Autonomous Nationalist groups in western Germany. They seized computer hard drives, weapons and far-right propaganda material—including 1,000 election posters for the NPD.
A top official in Germany's most populous state said this proves that the NPD is allied with the new far-right groups.
"This shows the close links between this right-extremist party and the neo-Nazi scene in North Rhine-Westphalia," said Ralf Jaeger, the state's interior minister.
Meanwhile, the "Pro Germany" movement represents a newer strand of ultranationalism capitalizing on German fears of Islamic extremism. Some of its chapters have gained seats in local assemblies in recent years by advocating a ban on the construction of mosques. But unlike most far-right groups, Pro Germany publicly disavows anti-Semitism.
There are no reliable estimates for the number of members these new fringe groups have. Authorities estimate that they number in the several thousands, with many more who sympathize with the cause but aren't actively involved.
Kerstin Koeditz, a left-wing lawmaker, said the proliferation of extremist groups has been helped by what she described as "a new wave of xenophobia from the heart of society." Persistent high joblessness in the east, growing anti-Muslim sentiment since 9/11, and fears that a collapse of the euro could destroy the German economy have given far-right groups plenty of political talking points, she said.
Koeditz, who sits in the state parliament of Saxony for the Left Party, says far-right groups have also become more adept at evading laws in recent years. German law forbids the display of Nazi symbols and any public glorification of Adolf Hitler, so many groups host their websites abroad and use anonymous online message boards to communicate.
Another reason for Germany's inability to keep up with emerging far-right groups is an unwieldy apparatus in which dozens of different law enforcement and intelligence agencies failed to talk to each other.
Germany's security services admit that although the number of registered members of nationalist parties is declining—the NPD had 6,300 members last year compared to 6,600 in 2010—the number of violent far-right extremists is rising. Authorities say there are 9,800 violent extremists, up 300 from 9,500 in 2010. These are people who have been involved in violence or who are linked to groups that explicitly advocate violence.
The domestic intelligence agency's annual report on extremism counted almost 17,000 far-right crimes in 2011, up slightly from the previous year. Of those, 755 were classed as violent crimes, such as attempted murder, arson or resisting arrest. The agency noted in its report that "one has to reckon with the existence and creation of right-wing terror groups as well as activities by individual right-wing terrorists."
"The vast majority of the neo-Nazi scene cooperates with the NPD or supports it regularly," the report found. It added that members of fringe groups who aid the party do so in the hope that "they will see a personal benefit from the election successes of the NPD."
The NPD receives over (EURO)1 million in government funding annually thanks to seats it holds in two state parliaments and experts say a ban on the party—with the loss of its offices—could disrupt the nationalist movement.
"But in the medium term the cadres of the NPD would continue in other organizations," said Staud.
At the party's summer rally, the evening ends with a sing-along that includes the line "I like Adolf."
Apfel, meanwhile, says he is not worried about a possible ban.
Pressed to elaborate on his comments about acknowledging Germany's past crimes—and to say whether that includes the Holocaust—Apfel pauses.
"You know very well that it's illegal to openly discuss certain issues in Germany," he said.
Frank Jordans can be reached on Twitter at http://www.twitter.com/wirereporter