If a person would have inherited a title upon the death of a parent they are allowed to have thier named changed. For example the current head of the House of Wittelsbach, Franz, was known as Franz, Prinz von Bayern but when he became the head of the House of Wittelsbach he was allowed to change it to Franz, Herzog von Bayern which basically is Franz, Duke of Bavaria.
Although titles are not illegal usage in Germany in some circles they are socially used. If memory serves me correctly, at the re burial of King Friedrich II the great of Prussia, the current air to the Prussian throne at the time, Louis Ferdinand was actually called Prince Louis Ferdinand of Prussia by the German Chancellor. 
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I find it ironic that ever since the imperial dynasty was deposed, the opposite is true: members can legally use only "Habsburg" on their passports. No titles or styles -- much less the designation "of Austria".
I'm less certain as to how members of deposed German dynasties are allowed to legally style themselves. I'm assuming that that the Bavarian royals could style themselves as Wittelsbachs, in the same way that the Austrian royals can call themselves Habsburgs. Or perhaps they can call themselves "of Bavaria", after all ...
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It is different in the traditional agnatic systems when one arrives at a female with the extinction of all other males. In this case, one can think of a second House of Habsburg, itself a branch of (and later wholly composing) the House of Lorraine. However, this is a genealogical designation... During the time of their monarchy, what you refer to the House of Habsburg-Lorraine or the House of Habsburg always referred to themselves primarily as the House of Austria . They did not refer to themselves as "of Habsburg" and it was only much later that the arms of Habsburg were tierced with those of Austria and Lorraine in their dynastic arms.
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