I've heard a rumor regarding German traffic law that seems too ridiculous too be true, but sometimes the truth is stranger than fiction.

Native Germans (or German lawyers): It has been stated to me that a person can be fined if another person claims they insulted them on the road (middle finger, finger pointing at your head, etc.). The claim goes on to say that the polizei will automatically take their word and there is no defense for the accused. (The logic behind this is that no one will write down your plate number and call the police if it didn't actually happen).

Is there any truth to this? Can someone actually make such a claim and have a fine imposed based solely on one person's testimony?

Sure.

But this is certainly not any German specific rule. Have you never seen these wonderful US court room thrillers about the white anglo saxon Georgian reporting the murder commited by an afro american?

The insulted in your case is a witness and the relevant question is, whether or not e judge follows a witness statement or not. Simply a normal court room situation. Reporting somebody to the the police without reason is a criminal offence too, so the report (and the witness statement under oath) has some relevance.

But without any witnesses, is it safe to say that the court is going to take the side of the accuser? Maybe person A asked out a girl that person B wanted to date, and as retaliation, person B says that person A flipped them the bird while driving so as to get person A fined. If person B knows that the court is likely to take their side, they aren't going to worry as much about making a false statement, as the court is already in their favor. The burden of proof is now upon person A to prove that they didn't flip off person B.

It just seems like this would be ripe for abuse. I don't understand why it would be natural to give more weight to the testimony of the accuser.

It's far more complicated than that. Without a witness and/or evidence, such a case probably wouldn't make it to court.

The underlying fact is: if the two witnesses (the insulted and the insulting) give contradicting statements, the court has to decide whom to believe. Usually, as stated above, such cases get thrown out of the window. However, if they end up in court, it is indeed easier for the insulted party to claim the court's ear. This is not due to law or anything, but mere tactics: the insulting- accused - party cannot be tried for lying to the court.
The accusing party however faces prosecution, if caught lying to the court.

This causes many judges to believe the plaintiff - especially as there has to be some reason for the case ending up in court (plaintiff a policeman, known history of similar incidents, etc); usually a case without 3rd party witness doesn't make it that far.

Not much really, no, but there is a core of truth to it. Seeing as "Beleidigung" (which depending on the circumstances translates into UK/US law as "criminal insult", "verbal assault" or even "criminal indecency", but - irrespective of what wikipedia.org says - not "libel", "slander" or "defamation", as these all require some sort of factual statement whereas "Beleidigung" does not) is a misdemeanor under S. 185 German penal code, flipping the bird, showing "the finger", verbal abuse and so forth is technically illegal and a criminal offence, and if you think you have a case you can report the facts to the police.

On the other hand, normal criminal procedure rules apply. That means that (1) the Polizei will not bring the case to court, as that't the DA's job, (2) the Polizei will not decide whether the alleged facts are true or not - there are courts of law for that, and (3) any fine will ultimately be imposed, or at the very least appoved, by a judge. In short, basic criminal law, just like for, say, petty theft.
Why yes of course. Anyone can always claim anything, and many do. Even if the claim's untrue, although then (if found out) the claimant would be in for defamation.
Not unless the judge is convinced that that person tells the truth, always bearing in mind that German judges tend to consider witnesses the weakest evidence there is, and - especially in "road rage" cases - will not necessarily be inclined to believe the victim rather than the accused.

[Harking back to the old days dept.]
I only had to plead "criminal insult" in a road rage case once, and that was a case where the accused hurled sexual abuse at a woman driver parked on the wrong side of the road - yes that can be illegal in Germany - from his truck and in front of twenty or so other mums all waiting for their kids in front of the kindergarten, together with said woman driver. Bad luck, mate. And he had the gall to deny the facts in court, all for a 400 DM fine.
[/Harking back to the old days dept.]

Thanks all. This is a rumor I commonly hear and wanted to know if it is as widespread as it has been made to seem.

It makes sense that the judge would not simply accept a victims statement without any consideration of the accused. It seems like it would be too easy for someone with a grudge to ruin someone's day, if they had the time and inclination.