My situation is this: in the dialogue I’m writing, the characters speak primarily English but occasionally use a German word for lack of a proper English equivalent. German capitalizes all nouns rather than just proper nouns like English does.
So, would it be confusing for to a reader if I intersperse German nouns in otherwise English dialogue?
It could be. But if there was a justification - or even a good rationale - near the beginning of the book, most readers would be able to work with it. (One character saying something like "I'm worried that I don't know the English word for angst" would do the trick.)
The convention is to use italics for the unusual word. Grammar and sentence structure would be unaffected (so perhaps use lower case for nouns that are not names).
If the reader knows that your characters (including, if applicable, the narrator) sometimes use words from other languages, it should be interpreted as part of that character's speech - possibly their identity. This operates just as well with entirely fictitious languages.
It's sometimes said that the beauty of English is that it has a mot juste for everything.
This is very common. Just yesterday, following a recommendation on another SX site, I read a science-fiction story by Fritz Leiber that holds up very well sixty years later. So it’s fresh in my mind for several good examples, such as:
Votbinnik had Jandorf practically in Zugzwang (his pieces all tied up, Bill explained) and the Argentinian would be busted shortly.
You can use this for effect. The Fritz Leiber quote helps establish that the world of chess has its own jargon that the viewpoint character asks for a “kindergarten explanation” of. (Another German borrowing, but one that’s lost its capitalization and italics.) Notably, the characters who talk that way are supposed to be arrogant, and the character who’s meant to be more sympathetic doesn’t explain things to the audience-surrogate the same way. And readers who know a little about chess—surely everyone reading a short story about chess sixty years later—will understand what Zugzwang is and appreciate how hard it is to explain to someone with no interest in chess.
Maybe the character who talks that way is supposed to be a stuck-up elitist, so condescending that he keeps explaining what esprit d’escalier means. Maybe the character speaks English as a second language. Maybe you want the reader to be as confused as your viewpoint character. Maybe you’re reminding the reader that your characters are really speaking a different language by throwing in the occasional untranslated word whose meaning will be obvious from context.
You’ve got to be a little careful with this, especially outside of quotation marks. “All according to Keikaku (Translator’s note: Keikaku means plan.)" shows how ridiculous a word sounds that’s completely gratuitous. If it’s not gratuitous because there is no pithy way to say something in English, you will end up needing to use even more words to explain the foreign word you just used. The explanation had better be worth stopping the story for. And using a word your readers won’t know and not telling them what it means is not communication.
Unless your work has a good reason as to why one of the characters is using these words, of course it would be confusing. An analogy would be to read a book with occasional words that are in a language you not just don't understand, but in a language you didn't even know existed. Not that this is necessarily a problem; Sometimes a work is written for a select audience (Tolstoy wrote parts of War and Peace in French). More commonly, works of translation peruse words that have no equivalent in the translated-into language, and so, the original is simply used.
German example: The word "lecker" has no English equivalent. The closest word to it is probably "tasty", but tasty doesn't exactly express what lecker means.
Language is inherently a social construct, so words that have no equivalent in one language are usually borrowed from other languages. "pyjama", "samurai", "baklava", "bigos" are all words that are not English, but we use for lack of English ones. With enough use, they become words we understand. If the German words you are looking to use are well known, then it shouldn't be a problem.
I like to use subtle rules between languages to denote accents that aren't exaggerated. For example, if I have an American character remark about the pattern of some fabric, he'd say "It has a lot of color" while a British character making the same remark would say "It has a lot of colour."
Likewise if an English Speaking German is in my writing, I might write his dialog with capital nouns regardless of whether the noun is proper or not to do an accent hint.
That said, German is remarkably similar to English grammatically (the other big difference was German's use of gender. English is a gendered language as well, but unlike most, English tends to apply gender to nouns capable of having a biological gender to begin with (or a characterization of a gender personality if they aren't gendered but human like) where as German doesn't ("The Girl" is a neutral gender word while The Turnip is masculine gender in German. In English, the girl is feminine because girls are female and turnip is neutral, because it's not capable of a personality or biological sex... being a root of a plant.). Misgendered words in translation tend to come up when English Speakers learn German, not the other way around.
