Statements like "people don't care what you look like, nothing sexual about it" are to be taken with a grain of salt in my experience. Friends and I have definitely experienced especially older men staring.
Maybe you're going to the wrong saunas or are in the 'wrong' bit of Germany. Here in Berlin we're all perfectly well behaved, and the clientele is generally very mixed in age and gender. I've honestly heard of anybody being put off by men staring. Or women for that matter. Or genitalia being waved around anywhere. As for big cocks, erm, they ALL look small and shrivelled in a sauna surely, but I don't really look. I used to go to a climbing wall where we always had a sauna afterwards, that particular one was about 75% male, most of them under 40 (ie reflecting the demogrpahic of most climbers), there was no problem being in a sauna with 3 or 4 men I didn't know. The only tension was between people who wanted complete silence and people who thought talking among friends was acceptable - now that led to some REAL arguments.
Most people take a large towel in with them, which is large enough so that if you want to lie down (space allowing) you have enough space for your whole torso, and if you want to sit it will cover your bum, legs and feet. You can use the towel to wrap around you when walking around outside. Then you use the towel too on the recliner while you're relaxing. It would be utterly disgusting to have bare skin sweating onto the wood of the sauna - about as disgusting as wearing a swimming costume that you sweat into and then possibly go swimming in afterwards. Ewww.
Whoever asked about the protocol for a steam room, where you obviously can't take a towel in with you: The steam room has a hose in there. When you arrive you wash down the section of seating you want to use so it's completely clean.
"The funny thing about Germans is that in the sauna they happily cavort naked, yet when going outside between about November and April they have 365 layers of Tchibo undergarments and overgarments on, so no centimetre of skin is exposed." True, it's funniest of all with the small babies under those huge duvets. But to be fair, it does get bloody cold here and central heating is a fairly recent innovation, so for older people the only option for survival was wearing a lot in winter. Presumably the sauna was their only option for getting nekkid properly for months on end. Talking of Tchibo, their ski stuff is out [[http://www.tchibo.de/skibekleidung-ski-outfits-t400059466.html this week]. If you want to stock up on your 365 layers. I can recommend the microfleece Sturmhaube.
"I remember in the 70's camping in Scotland, went to the toilet block and there was a German lady starkers with foot up on the sink giving her fanjo a through going over." I think that was the 1970s rather than anything else. It would be a bit extreme these days, even in Germany. A perfunctory going-over, fine, but a thorough going-over should be reserved for a private cubicle or home.