I guess that this film is/was imbued with added currency by virtue of it being made not long after the German tumult of the 1970s had calmed down. Some of the scenes and plot devices are clearly based on memories which were then fresh and vivid.
The atmosphere of chaos and confusion is aggravated by the unremitting "background" noise, generally supplied by television sets. For some people this could be distracting, not to say irritating, but I say embrace it, and your appreciation of the film will likely increase. The disorientation is all part of it, and The Third Generation is indeed sometimes an assault on the senses.
A task which confronts the viewer with this picture is ascertaining who, if anybody, the humour and satire are aimed at. Clearly to some degree Fassbinder was poking fun at "amateur" revolutionaries, with their absurd pretensions and rhetoric. Could it be that this movie actually invented and popularized many of the cliches which we now associate with the outpourings of urban guerrillas of that particular period?
The film-maker may also have been, at the same time, assailing the glibness and complacency of mainstream society, as exemplified here by the attitudes of some of the "non-terrorist" characters. It did also occur to me that this film may have been satirizing satire itself. The scene where a few of the gang members are playing Monopoly was one of those which prompted this notion.
There is a surreal quality to the dialogue for much of the time, with mundane concerns receiving undue attention from the characters, who also constantly spout the blindingly obvious out loud. It was the incongruous nature of some of these lines which made me laugh at times.
In assessing the characters, one would have to say that they are cleverly done. They are not totally convincing as urban guerrillas, but then again they are not wholly unconvincing either, possessing a rather nebulous, individualistic quality which complements the mood of the work.
During my recent viewing of this film, I warmed to it as it went on, being able to re-calibrate my mind to get a grasp of what the angle was. I began to "get" it, insomuch as films such as this can be "got". The plot attains some momentum and focus late on, and the ending is suitably enigmatic and ambiguous.