I don't know about that, I heard the same thing from a German relative 45 years ago.
It’s a back-handed method the Germans use to hide their shame -— and blame WWII (and the murder of Jews)on Jews, themselves.
It’s nonsense, and even the non-sensical tale (his mother having an affair with the Jewish man whose house she kept) would not have resulted in a Jewish child, as status of “Jew” is (excepting karaites) passed by mother or conversion.
Every German and every Jew knew it back in the 1920s. They used to sneer at Hitler because of his Jewish grandparent, Schickelgruber. The Three Stooges called him Schickelgruber. Hitler did all he could to wipe out any historical record of his family background (sound familiar?). Psychiatrists have analyzed whether his anti-Semitism was out of a desire to prove how aryan he was. There may be historians who argue that he was not part Jewish, but I have not heard what their argument is. I think it's pretty well established.
Urban legend... with no credible foundation. Of course it had the comfortable side effect for Germans to dissociate themselves from Hitler by linking him to the Jews. 45 years ago more so then today.