Germany's rearmament did influence military spending in Europe--and the world. Nearly every nation in Europe was rearming in the 1930's. Czech tank development ended up aiding Germany, after their nation was annexed and the Germans took over the Skoda works. French and British investment into their armed forces was greatly increased. This is most easily seen in airplane production. Not only did overall numbers of aircraft produced increase, but the types of aircraft were modernized. In the mid 1930's, the air forces of most nations were comprised of biplane fighters and a few monoplane bomber designs. By the outbreak of war, the vast majority of fighters were cutting-edge monoplane designs that were a leap in capability over their predecessors. This goes for nations that weren't even combatants in the war in 1939, as FDR called for huge increases in aircraft production long before the US was an official combatant. Eventually, the US would produce aircraft at an incredible rate that will likely never be matched, but even before hostilities began there was a massive increase in aircraft production.

For more information on this, The Age of Airpower by Martin Van Creveld is a good primer.

WWII didn't exist in a vacuum. Most of your answers lie in WWI. The mere toll on the population of France alone from that war was so great it really shouldn't be something to sneer at and think they just 'gave up' as popular rhetoric these days seems to imply. The psychology after WWI also didn't help. It was called 'the war to end all wars' for a reason. No one thought it could happen again, especially not so quickly.

Germany's quick invasion (known as Blitzkrieg) was incredibly effective in this manner. Along with countries wishing to avoid total war and allowing Hitler concessions of land, no one thought he would just keep going, especially at such an incredible pace.

Of course one must note that Churchill did anticipate this, and was preparing for war. The United State's own pacifism at the outset did not mean they did not supply Britain and Europe to fight back.

Denmark as you mention didn't really resist, and they have apologized for that error in judgement down to present day. Though resistance groups did exist which are very interesting in themselves.

Hope that helps, it is very broad, but then again, so were the questions. If you wish for something more specific don't hesitate to reply!

But there was an arms race. I'm not an expert, but doesn't the construction of the Maginot line count, in addition to the arms race in tank design and other aspects of warfare?

In fact, France as a country spent a large part of its GDP on armaments. Now unfortunately I cannot recall where I read this, but in the 30s as a matter of national policy France tried to support many, many military hardware development companies, and thus had a hard time with rationalizing a common inventory and ramping up production.

They tried to force consolidation, but it was a bit late.