What does this mean?
Some SS leaders, including Himmler, believed irrationally that they could use Jewish concentration camp prisoners as hostages to bargain for a separate peace in the west that would guarantee the survival of the Nazi regime.
I don't know what it means by "bargaining" hostages for peace.
It reads as if Himmler and others tried to offer the release of some (all?) of the prisoners in return for allowing Germany to continue with the Nazi government structure.
Another tutor may have better insight on this, but that's how it seems to me.