There seems to be some inaccuracy involved regarding the engine: At least following to the (quite extensive) German Wikipedia article, the Walter propulsion[1] never reached production state and the design was altered in order to fit a conventional Diesel-electric engine. For this the boats became even longer and bigger and the inner hull design was changed from an ideally circular cross-section to the unique 8-form, which introduced some other problems.

Anyway, it was a significant fail by the Nazi industrial system. From 118 boats produced, not a single one met the standards and all of these had to be reworked. (Most of these were only used for training missions, none of them saw combat action.)

[1] The Walter engine would have used in deed a hydrogen peroxide fueling system, and was the system that was deemed unworkable. The note at the end of the article has this right.