They (German number plates) most certainly are illegal on the road in NZ.
The rule has been quoted earlier in this thread.
The hawk-eyed police officer who pulled me over with mine, explained it very clearly. We had a cordial discussion on the roadside where I was alerted to the error of my ways with my German plates. Not one to push my luck, I subsequently sourced compliant, legal, NZ-issue number plates. Non-compliance resolved.
They're an issue when you get pulled for displaying them, they're an issue when they get you a ticket and fine.
There is inconsistency in how they are policed on the road, and at the WoF station. If you enjoy playing the odds, knock yourself out! Don't suggest there's any doubt about their illegality, though. That'd be disingenuous.