"what is the incidence of this "abnormality" in our breed? At what age would one notice this abnormality in a pup? Is this a genetic abnormality? And lastly, is it even recommendable to breed to a bitch that has this abnormality considering your pen ultimate paragraph and aside from all the other issues that gsdwins' pup has. . ."
A true case of an inverted vulva is not something that would be considered common to the breed, but it is something that does occur from time to time in any breed, as well as in mixed breeds. It's probably more common than intersexed dogs (what used to be referred to as hermaphrodites; these individuals have both male and female genitalia and reproductive structures of varied development), but much less so than bad bites or missing testicles.
As to the genetic componant of the problem, it is not considered to be a heritable trait, but there's little research on the subject, too. There is at least one study, however, that indicated fetal female exposure to androgens can result in an underdeveloped vulva. A similar situation occurs in cattle, when a heifer calf is twinned with a bull calf--the bull calf will be reproductively normal, but 90% or better of their twin sisters will have underdeveloped vulvas, and will be sterile as well.
Because the trigger is likely to have been exposure to hormonal influence in the utero, and not a genetic predispostion, it isn't likely that breeding a bitch with this condition will perpetuate it in her offspring. What would be of concern, however, if the problem doesn't resolve after that first heat, is the possibility of inducing a pyometra via introduction of bacteria--which is always going to be present on the urine-scalded tissue--through the cervix via the actual mating itself. Even breeding such a bitch using AI technique, unless surgical AI, would increase the risk of a uterine infection, so I don't think it would be worth taking a chance on the dog's life. Surgical correction of the inversion can be accomplished, but it is a tricky procedure, and the post-op recovery care is critical to the success of the correction.