@Greg **********
Again, permanent residency status doesn't matter when it comes to country of citizenship. Regardless of being registered or not, is the man not a citizen of Germany? When it comes time to get a new passport can he not go back to Germany and get one? Or are they going to say, "Sorry, but you are deregistered and therefore on HOLIDAY, so we can't help you"?
The Thai embassy in Germany isn't going to ask for proof he is still registered. They are just going to look at the fact he is a German citizen applying through them, and submitting the proof available to him that he is actually there in Germany with plans to stay there during the duration of the application process.
The whole permanent resident thing is for people such as Green Card holders in the US. Their passports are from a different country, but they permanently live in the US. Even though the US doesn't have the deregistering thing Europe seems to have - because the US is a tough, greedy pimp, and wants its money out of our asses no matter how long we've been away or where we are - a US citizen who hasn't had a home in the US for say 5 years, by definition, couldn't be said to be a PERMANENT resident of the US. Are they ineligible to come back and apply now as well?