Moon-and-Star: Just going to echo what the others said here - in Germany, cash really is the one and only payment option which is guaranteed to be accepted everywhere, though you might still want to stick to smaller bank notes for average purchases. A restaurant or supermarket probably won't be able to break down a 500€ bill for you, and anything bigger than 50€ bills can be a bit iffy for small purchases as well. But with a German credit card you should still be fine in most places (if you choose to get one, that is).
blotunga: Don't remind me that I hate large euro bills. I was in France for a business trip and my boss gave me a 500 euro note. Nobody wanted to even touch it. Finally I found some currency exchange where someone finally helped me out.
Well, to be fair, notes this large are regarded with a bit of suspicion in the average shop (unless you're buying something that calls for so much money of course) because people think they might be counterfeit. Banks should be able to break them down into smaller notes for you, though, just ask nicely (and let them confirm it's not counterfeit ;)).
In my experience, the largest bank note you would reasonably use in day-to-day life is the 100€ bill, and even that only when it's called for, e.g. buying groceries for more than 70€ or other expensive purchases. 50€ are the most easily accepted of the "bigger" notes.
