and "kraft durch Freude" (strength through enjoyment) was not a car... it was the nazi's very own travel agency. They wanted the "porper german" to have fun, so they organized everything from swimming courses, party evenings... up to proper cruises on big ships. The nazis intended that someone who is happy works better (for them). However the beetle was first called "kdf-Wagen", it should be very cheap and mobilise people, so they would be happier and work more. In fact the beetle should be germany's Tin Lizzy. Cheap, simple, reliable.
Designwise there's some rumour. Some eastern european guy could be the inventor of the overall beetly shape, a designer at mercedes claimed responsible for it... basically if we lived back in the days and would have been asked to sketch a simple car, everyone would draw the beetle without having seen it before: fwd - expensive. transaxle - expensive. get the engine to the back as much as possible to create more space, boot in the front, 4 seats and a cheap hull. here you go, the 356...erm...beetle
another fact: about 99% of the random facts on the interweb are hoax!
greetz
der butz