Disclaimer: not an expert, more a layman who's dealt with this particular question in regards to writing fiction.

The issue in regards to this is that Naziism is tied irreversibly to a strain of (discredited) racial theory that was quite widespread in the early / mid 20th century and drew inspiration from Völkish ideas. The ideology, at its core, relies on the notion of the Volk - as in an ethnically pure (German) people – to identify with one another and form the Volksgemeinschaft, or the (ethnically pure) people's community. Without that line of social-ethnic thinking, the ideology would probably not have worked, and would not have been able to draw such widespread support through the idea of "we belong together because we are one people". Naziism, after all, is not just nationalism taken to the extreme. It's explicitly based on radical ethnicicm (racism, if you will).

So, while one might argue holocaust and the Lebensraum plans were strategically stupid, they were also a direct consequence of this negative spiral of ideology. Consider that the Final Solution wasn't originally part of Nazi ideology and only became a question much later. It was the ultimate result of blame for Germany's ills being deliberately lain at the feet of the "Jewish / Bolshevik Conspiracy", which was presented as the natural (racial) enemy of the people (though in fact it's more a synonym for a random hodgepodge of ideological enemies, specifically social democracy and communism bound up in metaphor). That idea of this Feindbild (portrait of the enemy) drove Naziism during the 30s and, not unpredictably, led to escalation of racial hatred once war broke out. But the basis of this thinking had been seeded in the public mind for years before and people had bought into the idea on a wide scale, meaning to address the cause, you'd have to go back to where those ideas originated.

Thus, if we're going to examine how the holocaust & Generaplan Ost victims could have been better put to use, you'd have to first imagine a version of Naziism that did not rely on antisemitism, anti-bolshevikism, and the idea of an ethnically pure people to generate a sense of togetherness. Or rather, nationalism, where those ideas exist in private, but do not lead to rampant discrimination on behalf of the state. We know that Jews & Slavs were used as slave labor and to fuel the war effort, so the notion of making use of them wasn't completely lost on the leadership. The horrible reputation of the 3rd Reich arose due to horrendous treatment of those subjected, meaning the extremism, not the disdain for "lesser people" per se, was the cause of this particular woe.

Now, to me, the obvious solution to this conundrum would be to create a two class society – with the "pure people" on top and the "lesser people" below. But that runs contrary to the Nazi idea of an ethnically pure society, which served as the ideological foundation for pretty much everything the Nazis proposed and implemented leading up to the war (during it the lines got a bit blurred due to sheer necessity). People back home believed in their pure society and, the longer Nazi propaganda continued to influence the public perception of Germany's situation, the less the average citizen would be able to reconcile Naziism with a two-class society.

In fact, if you look at the early years of the 3rd Reich, it was in fact a two-class society and it sort of worked despite discrimination. Except it was never in a stable state, since the Nazi party relied on the them vs us narrative to implement their policies, meaning escalation was a foregone conclusion in regards to ethnic and racial ideas. So even if you wanted to put those people to better use (which seems to have been the case at least in the inception of labor camps, which amounted to slave labor first, genocide second), it was never really feasible within the bounds of a society that believed in the National Socialist ideal.

Rather, you'd need a less extreme nationalist government, perhaps more resembling the Imperial Germany of the early 20th century. But I don't see how anyone could have made that work after the treaty of Versailles and Weimar Republic's failings, much less after the rise of Naziism, winning out over both communism and social democracy. Once the Nazi party managed to grab power, any hope of de-escalating the racial / ethnic divides rapidly vanished, and the predominant personal and state ideology steadily became that of the ethnically pure society, where there never would have been an option to treat Slavs, Jews, or any other undesirable better unless they were not part of the core society – meaning, oppressed and vulnerable to abuse anyways.

In short: they'd first have to have stopped being Nazis before they could treat lesser races better, at which point the Nazi ideology falls apart at the very core since it's based on a deeply held notion of racial superiority.