My niece in Germany is applying for undergrad colleges, at this point she likes medicine and biology both. But she is not sure if she wants to end up being a doctor or a molecular biology researcher. It seems that the German system bifurcates from undergrad itself between medicine and biology - so in her case what would be a good option if she wants to do an undergrad and at the end of that decide to continue with medicine or focus fully on biology? If not possible in Germany, are there other European universities where this is possible?
In the German system, there are many courses of study that cannot accommodate as many students as who would like to enroll. This is also the reason for what you called a bifurcation -- without doing that early, i.e., at the beginning of the studies, the university would have problems allocating the needed resources. Many universities have both restricted courses of study and courses that are completely open for anyone with a high school degree to enroll.
Note that Medicine is a full course of study taking at least 6 years. It's not a typical undergrad course of study. It should certainly be possible to study for a M.Sc degree in a related discipline afterwards, though. But that is rarely necessary - your niece could jump into research in an area related to her doctoral studies during the MD degree, if desired (many MDs have their doctoral thesis done before even getting their MD degree).
Switching from biology to medicine will be difficult due to the access restriction to the medicine course of study, at the very least without first finishing the complete biology course of study.
I'm a current med student in Germany. First things first: Biology and Medicine are taught absolutely independent from each other. There will be no easy switch no matter which subject she enrolls in first. Biology is organised as a bachelor/master's program, in Medicine we graduate with so called state's examination. So say she starts studying biology and after two semesters she wants to enroll in med school: she will have to start all over again. At this point she may be interested to know whether her background of Biology studies could reduce her workload at medschool (not required to take some classes etc): the short answer to this is no, probably not. She will have a broader understanding of some basic science taught in both bio/medicine, but that's it. When I was doing my A levels, I too considered both molecular medicine and medicine. At some sort of open day at university, a Mol. Med professor told me it really comes down to one thing: are you excited to work with patients or not? Both subjects can path the way to science (mol med probably easier, but you can get into science after graduating med school). Only if you graduate medschool, you'll be able and allowed to treat patients. For me, that was the moment I decided to study medicine.
I'd advise your niece to do an internship at a hospital to see if that's the kind of workplace she could imagine. Because that's what it comes down to in the end.