I don't know enough about Nazis to get fully into this question, but I can speak to one Baroque composer: Handel. For a variety of reasons, the Nazis saw him as both very important and yet potentially dangerous, and actually ended up modifying/re-libretto-ing (that's not a word, right?) some of his works to suit their agenda.

Handel occupied a peculiar place in Nazis' minds because of his biography. Born in Germany, he ended up moving first to Italy and then to England and found great success there. That success of a great German composer abroad could be seen as proof of German music's superiority and influence over the rest of European music, so Handel's music was not as easily dismissed as other music that might have been deemed "degenerate" due to its subject matter.

In fact, many of the concepts of "classical music" as we know them even today come from the German nationalist movements of the 19th and early 20th centuries, which in turn had a great deal of influence over how Nazis viewed music. It's no coincidence that a disproportionate number of the best-known classical composers (Bach, Handel, Mozart, Schubert, Beethoven, Haydn, Brahms...) were from Austria and Germany. As German nationalism started to push towards unity, Austro-German classical music was held up by critics and musicologists (both disciplines largely developed in Austria and Germany, BTW!) as the pinnacle of artistic achievement.

Another development throughout the 19th and into the 20th century was the rise of amateur ensembles, especially choirs, devoted to singing good ol' German music. And here is where Handel has a phenomenal advantage over many other composers! Not only did he write what is probably the single most famous and recognizable choral work in all of classical music, his 25 oratorios provide plenty of material for a choir to sing. By 1931, there were over 19,000 choral societies in Germany with around 2 million members in total, quite a significant movement! On the back of this surge of interest in German music in general and choral music in particular, Handel saw his own bump in popularity.

Politicians took notice, and music critics and musicologists were keen to promote their own views. As Germany licked its wounds from its loss to (among others) England in World War I, one musicologist even went so far as to say that if Germany had understood Handel as well as the English did, they might have won! It's worth noting that this dude, Alfred Heuß, was both remarkably anti-Semitic and fairly hostile to the avant-garde. One of his favorite targets was Arnold Schoenberg, whose 12 tone compositional technique was both massively influential and detested by many, including the Nazis. While he died in 1934, Heuß was certainly indicative of a popular strand of musical thought that the Nazis enthusiastically picked up on.

Another enthusiastic Handel-lover was another Alfred, Alfred Rosenberg. In 1935 he gave a speech in Handel's birthplace of Halle to honor his 250th birthday. In the speech, Rosenberg took pains to distance Handel from the very obvious Jewish themes in some of his most famous works, saying that the opera Judas Maccabaeus was strictly interested in military heroism, and that the "Judaism of the Messiah and the Messiah of Georg Frederic Handel, in the final analysis, inherently have nothing to do with one another." Never mind that Judas Maccabaeus is an oratorio quite literally about Jews fighting back against a force that is trying to eradicate them!

If Rosenberg's name rings a bell it's because he was a prominent Nazi ideologue who would end up being convicted at the Nuremberg Trials of a whole host of crimes and executed later that year. He and Joseph Goebbels were instrumental in labeling various musics as "degenerate," including but not limited to just about anything they deemed as having Jewish influence. You can see the issue when they come across a German composer, held in high regard as an excellent example of German superiority, whose texts fairly frequently deal with very explicitly Jewish themes!

This didn't phase the Nazis, who continued to use Handel in various ways, staging a few of his works as part of the festivities of the 1936 Olympics, for example. They dealt with the "problem" of the Jewish themes the same way they dealt with a lot of things: obfuscation and censorship. Handel's less-Jewish oratorios and operas were promoted above his more Jewish ones, and various words, phrases, and passages were amended to make them more palatable to Nazi audiences. Others were completely changed, with Judas Maccabaeus getting re-written multiple times. One rewriting turned into a Hitler-praising oratorio called Hero and Labor of Peace, another made it into the tale of William of Orange. Jephtha, another very Jewish oratorio, was rewritten into The Sacrifice, with the Jewish judge Jephtha turned into a strong military leader.

Overall, like many things Handel's music was a massive conundrum to the Nazis. On the one hand, the greatness of German art; on the other hand, inescapable Jewish influence. I'm sure others can chime in with how they dealt with other composers, but suffice it to say that there isn't much reason in many of the ways in which they conceptualized music.

Sources

Levi, Erik. “The Aryanization of Music in Nazi Germany.” The Musical Times 131, no. 1763 (1990): 19–23. https://doi.org/10.2307/965620.

Potter, Pamela M. “The Politicization of Handel and His Oratorios in the Weimar Republic, the Third Reich, and the Early Years of the German Democratic Republic.” The Musical Quarterly 85, no. 2 (2001): 311–41. http://www.jstor.org/stable/3600915.