It's been a while since I've studied the factors leading to the rise of the Nazi's and I never really studied it in much depth, so I won't go too much into that, I do recall the communists were pretty big in Germany. That being said... I'm not sure I agree that a communist Germany, even one allied with the Soviet Union, would likely be worse than Nazi Germany. It certainly could be that that would have been worse, but it's also possible, and I think maybe even likely that it would have been better...
As horrible as things were in the Soviet Union, Hitler deliberately executed about 9 million people, for no reason other than who they happened to be, (6 million jews, but there were also about 3 million other people executed in the concentration camps if I recall correctly, gypsies, homosexuals, people with mental disabilities, and many many others) and started a war that led to the deaths of many many millions more. I think it's pretty hard to argue that almost anything would be worse than that.
I realize it's a counter-factua, and there's no way to know how things would turn out, and so yes, I'll concede maybe the world is better off than it could have been had the communists taken power in Germany rather than the Nazi's, but I'm not sure it's as likely as you are presenting it. Perhaps a Communist Germany would have provided a balance and tempering influence on the Soviet Union. Maybe things would actually have been better in both Germany and the Soviet Union if the communists had won? (Surely they would still have been bad, but maybe not as bad. Maybe Stalin wouldn't have had as much influence, or maybe Stalin would have gotten jealous and they'd have found themselves going to war with one another, without involving the whole of the rest of the world. Who knows.) Sure East Germany wasn't much more than a puppet of the Soviets, but perhaps a united Germany, not devastated by a war would have been strong enough to assert themselves.
Or maybe Germany would have been in communist control for some time and then would have reverted to another system. Maybe we'd have ended up with more or less our current Germany, and Europe, but with a lot less turmoil and bloodshed. There's just no real way to know.
All of that having been said, I do really enjoy counter-factual's with history, I think they're interesting to explore and think about, I'm just trying to point out different that the results of Hitler not coming to power aren't nearly so clear as you have presented them. Since none of this DID happen, there's no way to know what would have happened.
Also, really, it's just hard not to at least play devils advocate with someone arguing that Hitler coming to power was a good thing... ;)