[tanteoma]

I solved the problem myself and now my Kindle touch has a nice Duden dictionary that's automatically consulted when the book is encoded as German.

If anyone is interested, here is how.

Part I - Getting the dictionary
1. Download a kindle reader for PC from Amazon.de, install it.
1a. If your Amazon account is in US, change it into a German one.
2. Download a free German ebook from amazon.de kindle shop. I picked a Jules Verne one. Just pick one at random as long as it's in German, not English or any other language.
3. Open it in your kindle reader on PC. Higlight a word using your mouse. Kindle Reader would think you are trying to look up a German word and it downloads the Duden dictionary automatically.
4. Go to where Kindle Reader stores file on your pc and identify which .azw file is the Duden dictionary. Mark it or remember it. Now you have a Duden dictionary with DRM protection.

Part 2 - De-drm the dictionary file
There are probably many ways to do it. I googled for five minutes and downloaded a plugin to Calibre, dragged the Duden file into Calibre and there, the de-drmed file showed up in my Calibre library. I saved it in .mobi format then dragged it kicking and screaming into Kindle under documentaries/dictionaries category, so it's sitting pretty next to the original Oxford dictionary & co. Now I can look up German words on touch as fine as long as the book is encoded as "German".