I agree they were the best standing army in modern history. There were several factors that contributed. Training was certainly important, acceptance of the military as part of the German culture allowed for a strong officer corp and was also important. Technical innovation was also a key.

Reasons they lost are numerous. Offhand, I think Hitlers meddling in military strategy may have balanced out the natural conservatism of the military. The blind pig theory, he may have won them European domination early on, but he bungled badly in the Russian campaign. He should have taken Moscow when he had the opportunity, he should have passed up Stalingrad in favor of the Caucasus oil.

Atrocities against the Russian civilians cost them the role of liberator from the hated Stalin.

Better diplomacy might have won them an early truce with Britain and better coordination with Japan could have pinned Russian reserves in Siberia.