Yes you can only ban them if they threaten the democratic order. Or to be more precise:
Eine Partei kann nur dann verboten werden, wenn sie nicht nur eine verfassungsfeindliche Haltung vertritt, sondern diese Haltung auch in aktiv-kämpferischer, aggressiver Weise umsetzen will.
Which (if you don't know German) basically means
A party can only be banned if it advocates an unconstitutional position and also plans to use militant and aggressive means to reach their goals
- rough translation I might try to find a source for a better one later
Now I believe that the AfD does fit those criteria (unconstitutional position for sure, but them working together with militant neo-nazis etc. should fill the second criterium as well). But that's just my opinion and in this situation it does not count as much. The process here is that the court will decide wether or not the AfD fits these criteria and based on that they will be banned or not banned.
This is the important distinction to what you've outlined. It's not "banning political opponents" it's banning opponents of the constitution. I'm also not saying everyone with opposing views should be jailed I'm saying a party that opposes the constitution should be banned according to the constitution.
That's correct but in my opinion that's a great argument to push for a ban. As you say that's how Hitler came to power with the NSDAP, so it would only be correct to use this law to try and prevent history from repeating itself. If we find out in the court that the law currently doesn't apply it will be a win for the AfD of course but I believe and hope that it won't be and that they will be banned. But if we don't try and enact the law now how long do we wait? Till they are in government? Till they enacted emergency laws ...
Also, again, I do not believe this a definite solution to the "problem" of AfD and right wing movements in Germany. I do however believe it will be a big blow to the Right and might give us some room to move into with progressive ideas.