Are candied lemon peels bitter?

Also, make sure that you scrape away all of the soft white pith just below the yellow skin. That's what makes it bitter. A touch of bitterness is nice, as noted below. Also, I've found it works best to blanch four times, refreshing the water each time, before simmering in syrup for 30 - 40 minutes. Then I dry the peels on a rack until almost dry, and roll in sugar. The granulated sugar counters the bitterness, too. ;o)

A little bitterness may remain and is not bad. It is more interesting than simply sweet. However, if you are getting frustrated, just use grated fresh peel in place of the candied peel. Pfeffernüsse are very forgiving.

Are you toasting them before the sugar process? If so, lemon peels will be lemony with some bitterness. You need to be careful to avoid the white pith when peeling. The pitch is very bitter. I've never boiled them more than twice. I'd worry they would fall apart.

This is the technique and recipe I use:
http://www.epicurious.com/recipes/food/views/candied-lemon-peels-232352

Generally speaking, more sweet than bitter.