Yes, she's his half-niece; traditionally that kind of relationship was considered less strange in Europe than in the USA (it's started to be considered more strange in the last 20 years or so). I assume there was more stigma in Germany about that kind of thing than in, say, Britain, because Maria was shocked when Otto told her he'd been dating his cousin in the 1940s (which a British person wouldn't have batted an eyelid at); but generally speaking it would be acceptable for an uncle and his half-niece to have a relationship in 1982 in Europe, believe it or not.
If you're interested, as a British viewer, I wasn't bothered by their kiss from an incest perspective, though I did think Hermann was pretty sleazy as I'm pretty sure Gisela was a fair bit younger than him I didn't get a great look at all the dates on the family tree in the intro of that episode because I was reading the subtitles as well, but as I recall she was Anton's youngest daughter. Typical Hermann.
"I only ask that you respect my jumper!"

Yep, it was Giselle, his niece (daughter of Anton) and even if she was hot, it's still incest. Bleeurgh!

Even though Anton is his half brother, such a relationship or even tryst is disturbing because of it's incestuous nature. Unless of course it's normal in Germany for relatives to tongue kiss each other passionately on the mouth.
Man without relatives is man without troubles. Charlie Chan

I thought she was the daughter from Anton, wasn't it?
The girl that was beside Martha when Anton thought he was going deaf.