In my experience, both studying this for years and knowing a lot of Germans, whether they knew something of not is complicated. A few points.
1. If you were a soldier in the East, you certainly knew.
2. If you were a soldier anywhere except maybe North Africa, you probably knew.
If you doubt 1 and 2, read this:
Soldaten by Snke Neitzel and Harald Welzer3. If you're a civilian, this changes. Information was deliberately hidden from them and soldiers on leave generally did not talk about this in the open. Now, you have to be very credulous to believe this, but many people were.
Think of it this way. In America, we didn't as a people know we had a president who lied to us until Eisenhower lied about the U-2. Even then, that was "understandable." When government (or in the case of us in WWII, a pro-government media) controls the news, nothing you hear contradicts them, so anything that might leak your way sounds like a conspiracy.
Think of all the elderly people you know and how easy they are to dupe. It's because their worldview is not inherently skeptical the way ours is. This is why they are targets for scammers. Because they are trusting. Not just our generation from back then, but many other countries' people were like that, because they weren't exposed to the full range of shocking ideas. Think of Penn State Coach Joe Paterno and his failure to act on the rape case. It was in great part a generational response. He can't contemplate something of that nature, so he refuses to believe it.
So they're trusting and believing in general, but then add to it an emotional buy-in. We too have idols, and we refuse to believe them because we've invested in them. Think of how long it took people to believe the stories about Lance Armstrong, or how long it took people to admit that Princess Diana was sleeping around (oh no, she's pure, she's pure). Hitler was these cases times a million, because he was like a God to the Germans. Even after they learned the truth, they tried to blame other people or say that if Hitler knew, he would have stopped it, whatever.
And of course, knowing is not a passive act, it's an active one, particularly in a police state. The average German didn't sit around wondering what happened to all the Jews who were shipped east. They were worried about their sons, daughters and what hole they're going to have to hide in tonight when the bombers come. So for this woman, there was a convenient story which the media - which means her boss - told and she probably didn't spend much time thinking about it to create doubt in her mind. Now, some other story more relevant to her life, such as why are we losing when Hitler says we're winning, is more likely to be something she rolls around in her mind. But unless she stumbles across an old letter from her Jewish friend and starts to wonder why she hasn't written from her new home in the East, she probably isn't thinking about the Jews much at all after 1942.