Having said that, it was the German General Guderian who 'invented' Blitzkrieg.
Seeing how "Blitzkrieg" is a myth (ie: something that is not real), I don't see how it can be invented by Guderian. He pioneered intergration of mechanized forces into the largely 19th century-ish, horsedrawn, foot-marching Heer, but he did not invent the tactical and operational employment of armoured warfare; the Germans simply adapted to their doctrine that, as Michael pointed out, was developed between 1870-1918.
I believe that if this Blitzkrieg was launched against a prepared, quality force, then it would have been far less effective.
Like the French?
The French Army had more troops, heavier tanks (and more of them), and was entrenched in one of the most extensive and intricate defence systems ever constructed. However, they had some organizational and institutional flaws that the Germans were able to exploit, ultimately rendering the French irrelevant. Essentially, they got into the decision cycle of the French Army.
Blitzkrieg is more a result of technological advances in tank design than some mystical genius masterplan of the German's (as indicated by Infanteer's post).
I disagree. Until the later models of the PzKmpfWgn Mark IV armed with the long barrelled 75mm gun, German tanks were quite inferior to most Allied tanks (the superior Russian designs in particular). As well, there was never more then 20% of the German Army that was actually motorized or mechanized in any way; essentially, the snazzy looking Tigers and Panthers, although dominating tactically, were too few in numbers to be a factor operationally against Allied armies which were for the most part completely mechanized.
Another fact that jumps out from looking at the successful campaigns in France and early North Africa is that the true strength in the German Army was their Anti-Tank Guns. The 50, 75, and 88mm were all superior designs; when combined with well trained crews and commanders who could employ them quite well (Rommel in many cases), they were able to nullify any advantages that the Allies possessed with their superior armoured vehicles.
I think that another note of historical relevance that deals with German armour addresses a key weakness of the German military; production. While the Soviets were for the most part able to take a successful design and stick with it (sure, they had ISUs, KVs, tankettes, and lend-lease; but the T-34 was the mainstay) German industry was forced by Hitler's tinkering to constantly retool its armoured production to his various ideas on armament, armour, overall design, rush to production, etc, etc. Just look at the number of versions of the T-34 (three or four) to the number of versions of German armour (5-6 for 6-8 different Marks). Not only does this seriously strain the logistic and maintenance system (which the Germans, in their ubiquitous pursuit of the decisive battle, were never really good at anyways), but it forced many poor or flawed designs to the front. The Panther and the Tiger, for all their press, were seriously constrained by their mechanical problems. In the Western Front, where a lumbering Tiger II was essentially a moving blockhouse, this problem was not as obvious; but when needed for decisive tactical and operational maneuver, such as Kursk, it proved disastrous.
Thus, in their successful campaigns the Germans were able to use their "mystical genius" (I would call it a different approach to employment of doctrine) to out maneuver their opponents in time and space with relatively technologically inferior forces.
However, it's number one advantage is that it exploits indecisiveness. By the time the Allies reacted, the battle was over.
This is referred to by theorists as "getting into an opponents decision cycle"; essentially, by the time the Allied armies would orient and decide on a reaction to a German maneuver, the Germans would already have changed to a new action, rendering the choice of Allied command irrelevant and thus spreading panic and confusion and breaking down cohesion.
Quick, decisive action can overcome this tactic, as demonstrated in North Africa and following the Normandy invasion.
I wouldn't say that the campaigns in North Africa and Normandy were examples of "quick, decisive action". Both were examples of plodding, methodical advances that relied on superior Allied material strength and an abundance of firepower to destroy the German Forces. Montgomery, sneaking a close victory out of El-Alamein, was able to build 8th Army to great strength. Rommel, on the other had, was plagued, for many reasons, with no supplies or reinforcements and basically did what he could with what he had. The fact that the Americans were coming from Morocco helped as well. I certainly wouldn't call Kasserine an example of "quick, decisive action".
Normandy was much the same. The landing of over 100,000 soldiers with total control of the air and naval support from the largest flotilla ever formed allowed them to smash through the German defences (or "kick in the door"). Even then, their lack of "quick, decisive action" led to failure to close the Falaise Pocket and permitted an orderly withdrawl of German forces to the Rhine.
As well, once the battle lines stabilized, and front lines were established, the Germans weren't able to hold the ground they gained. In this area, Hitler's incompetence really was the downfall of the Third Reich. Look at Stalingrad. Hitler's decisions, and Paulus' inability to either stand up to him or disobey his orders, allowed an almost beaten, severely diminished Russian force to encircle and annihilate them.
I think there is a bit of confusion between notions of tactical and operational defence and strategic defence. German doctrine regarding defence was based upon the notion of the counterattack. As such, it never really focused around holding "battle lines" and "front lines" (again, this came out of the WWI experience). A good example of this would be Manstein's 1943 counterstroke. A bad example of this would be the '44 Ardennes Offensive.
When you refer to Hitler's decisions to "hold at all costs", I think you are correct in pointing out how it contributed to overall German failure. In many cases, the notion of a mobile defence was stifled in favour of attritional defence due to the ideological rational of Hitler (don't give up the
Lebensraum); fighting an attrition war with the Russians was something Germany had no chance in winning. However, I don't think Hitler can share all the blame. At Stalingrad, failure in operational intelligence was responsible for allowing a German Army to get drawn into a city while leaving poor quality Romanian armies to guard both flanks essentially led German commanders to become the victim of their own
Kessel (cauldron) battles.
However, I wouldn't characterize the Soviets at the Stalingrad to be a an "almost beaten, severely diminished force". Although reeling from a surprise shift from Moscow to the Caucasus, the Soviets had managed to amass quite the strategic reserve. As well, new work by Col. David Glantz has shown that Stalingrad, for the Soviets at least, was only the sideshow until late December. Zhukov, with Stalin's blessings, put the main focus of Soviet forces into an attempt to encircle 9th Army in the Ryzev Salient. Since Ryzev was out of the spotlight from the German perspective, it did not achieve the cult status and attention from Hitler and Model was allowed to successfully defend the Salient without much interference.
Stalingrad, on the other had, soon gained the attention and resources of the Soviets when they realized that just as Operation Mars (the attack on the Ryzev Salient - Zhukov's pet project), was approaching disastrous failure, Vasilevsky's success in Stalingrad was more then they had expected. They subsequently sought to exploit their success by shifting Soviet strategic reserves south and Zhukov, in typical Soviet revisionism, later downplayed Operation Mars and claimed Operation Uranus (Stalingrad) as his own.
The point is, the numbers of fresh resources and troops that the Soviets funneled into two massive and simultaneous offensives intended to encircle and destroy two seperate German Armies (no small task - encirclement requires a "double-sided" defence to keep the encircled in and their friends out) seems to indicate that in 1942 the Soviets were far from being an "almost beaten, severely diminished force".
I suggest you refer to 'The Rise and Fall of the Thrid Reich'....it is perhaps the most comprehensive, detailed histroy of WW2 ever written. Not the most exciting read, but very heavy on detail. I know you can find the answers there (as I have read it), I just can't remember all of the nitty-gritty details.
Shirer's history, although excellent in it's own respects, is mostly a socio-political one. I think its use in a study of operational doctrine and tactical employment of maneuver forces would be quite limited.