Why would the Nazis free Vladek and other Jews from the Prisoner of War camp into the Reich? How does this benefit the Germans?

I'm not sure what section of the novel you're referring to. In Book 1/ Chapter 3, Vladek signs release papers believing that he'll be sent to Sosnowiec, but that release never happens, and he is sent to Lublin. The Jews are misled once again, and Vladek believed he would be released, but it was simply another ruse.