German bombing
 

With the bombs loaded nose up in the bomb bay, how much accuaracy is lost with the bomb having to flip to nose down position once released. Did they have to take this into account?

:?:

yes, it was known that the kind the He111 carried its bombs made the bombing some kind of less accurate.
The Blenheim had also problems with its accuricy because the its bombdoors were opened by the weight of the bombs . There was no "open bombdoors" before bombrelease with it.

Anyway,WW2 bombing was far away from laser or gps guided bombing nowadays :D
even the Norden bomsight equipted US heavis were used in masses to hit, not to talk about to destroy targets.

Does anyone know why bombs were carried vertically nose up in the 111? I've just assumed it had something to do with arming the fuse in the nose as they fell away.

The vertical position is simply to carry more bombs (moar power) in a same volume.
About the nose up, perhaps it is easier for the ground personal to put them like this ,or if the bomber accidentally live their bomb before taking off, the detonators won't be damage (protect detonator from flak too).

I think it was just done that way to squeeze more bombs in the bay. The He-111 was initially developed as a civilian transport to circumvent the restrictions of the Versailles treaty, it even had a different, airliner-style cockpit.

I guess it wouldn't take much for an allied engineer/designer or an intelligence analyst to take a look at a few photos and identify its potential for bombing if it had been built with a cavernous fuselage from the start.

My assumption is that they went with a narrower fuselage partly to maintain appearances and partly because it was indeed used in civilian roles as well (mail carrier, etc), but when it was converted to a bomber this limited available bomb loads, hence the vertical bomb storage.

If you compare it with the Ju88 for example (which was designed and built as a pure bomber), you'll see that the 88 not only used a horizontal bomb bay arrangement but it also had dual bomb bays.

That being said i'm not 100% certain of this, i'm just piecing together known bits of information and making a reasonable assumption. I could still be wrong and they might have had a different reason altogether :-P