You are right that the German leadership was too myopic. They didn't think they would lose and so wouldn't have accepted peace. Which is sad given the state of their allies at the time. The Ottomans and Habsburgs were both essentially useless.
Most of the lesser Allies were useless. Italy and Romania were supposed to tie up large numbers of German troops and give the greater Powers some slack, and it turned out they turned out to need British troops to prop up the cause on the southern front. Greece needed so many Brits stationed there that the king of Greece said he felt like the king of (enemy-occupied)Belgium.
As for Germany, it was a case of failure of political will. They agreed to a cease-fire on the expectation of status quo ante, which was not unreasonable, without a single Allied soldier in arms on their soil, and the disproportionate casualties inflicted. Once the Allies changed their tune, the king had already abdicated and the army demobilized and there was no way to fight for better terms. Any notion of Germany's defeat on the battlefield was the result of British propaganda and American acceptance of the same. France's role and the effectiveness of the French soldiers were similarly denigrated. A generation later, the propagandists would do the same thing, exaggerating the military prowess of Nazi Germany & the UUSR.
“Tolerance is the virtue of the man without convictions.” GK Chesteron
Inde muagdhe Aes Sedai misain ye!
Deus Vult!
*MySmiley*