Partly true. The German interest in rocketry began before Hitler's political ascent. The German Army, limited by the Treaty of Versailles, lacked artillery. They were looking for a way to deliver an explosive payload by alternate means so they assisted the early German "Rocket Clubs." This was done on the cheap, but it shows that there was early funding.
The Soviets also were experimenting with rockets during this period. The most practical result for both sides were the battlefield rockets that could saturate an area target like an opponents gun line.
The chief problem from a weaponization standpoint was one of guidance. Since they really couldn't hit anything even the realtively sophisticated V2 had to be aimed at large area targets. Basically it was a terror weapon.
I've heard that the V2 was basically too inaccurate to be usefull but I've changed my mind.
The maximum scatter at the end of its maximum 240 mile flight was about 7 miles. (About 5% of range) using the LEV-3 guidence system. This was a pair of gyroscopes that kept the missile pointing in the correct direction plus a PIGA (Pendulating Integrating Gyroscopic Accelerometer) that counted of acceleration, speed and distance travelled to initiate the various tiltover sequences and the motor cut of sequences. However the Germans had two other guidence systems: the SC-66 which was only tested 3 times but latter developed at the US Redstone Arsenal and by the Soviets. This had 3 gyroscopes and the accelerometers in a stable platform to improve accuracy. Seems to have gotten the scatter down to about 1% of range in the developed US and Soviet Versions used on early Redstone and SCUD missiles and finally in the Drapper based PIGA guidence systems for the MX missile the error of this air bearing mechanical inertial guidence was down to only 1 and a half feet after an intercontinental flight of 8000nm. (errors in gravitational maps extended the error to 100m).
The Germans were using also the 'Viktoria Leitstrahle' (Victoria Guidence-Beam) that kept the V2 missile on track for the first 70 seconds of flight when most inaccuracies occured. It was used in about 25% of launches and improved accuracy 5-10 times. They put great effort at keeping this secret as there was the possibillity of using this period of transmission to locate the launch sites and to possibly jam them. (albit difficult considering the short transmission time, range and upward trajectory). A more advanced version with improved jam resistence and accuracy opperating on higher frequencies was under development.
With the Viktoria system the maximum scatter would appear to get down to 1.4 miles. Guided weapons normally exhibit a 'normal' or Gausian distribution. This means they are more likely to cluster their hits near the aimpoint than distribute randomly in a Poisons distribution. My rough calculations suggest a probabillity of geting within 50 meters of the aimpoint of 2.5% (i.e. 97.5% miss rate). If some 2^6 or 64 missiles are fired then the chances of a hit within 50 meters is 80% and virtually 96% of getting a hit within 100 meters. Raise the missiles fired to 128 and the chances of a 50 meter hit goes to 96%. If the V2 was fired at closer targets its accuracy went up proportionatly.
Now the cost was about Reichs Mark 47,000 if mass produced at 5000 year. This is about the same as a single engined fighter and probably about 1/3rd that of a 4 engined bomber. Original production plans were for 5000 per year (410 month) though Hitler demanded 3000 per month at some point. The one tone warhead was small but on the otherhand quite detructive because of the kinetic energy of the missile and residual fuel. While a V2 was a single use weapon it didn't require an expensively trained pilot or crew to be placed at risk nor an extensively defended airfield nor did it in theory suffer from attrition. At production rates of 410 a month the German could send 200 towards a single target every fortnight and completely devastate an area.
The terrorism aspect of it was that there was no warning and could thus make working in an area unbearable.
There was also a winged version with a range of 600 miles which needed a more developed guidence system.