It's a bit more complicated. The reparations were a bigger concern in the early interwar period and hamstrung the Weimar government but a big problem was that although Weimar Germany was formally a democratic republic following the deposition of the Emperor, a lot of its institutions were still monarchists and saw the social democrats as traitors, hoping for a restoration of the monarchy.
For example while especially in the build-up to 1933 a lot of the political violence and murders came from the political right and especially the NSDAP, German courts would repeatedly rule the attackers "not guilty" if the victims were on the political left because they did it "out of the love for their country" (i.e. the monarchy). Even the "rise to power" of the NSDAP was a de-facto legal process following the passing of the Enabling Act, co-signed by the conservative Christian "center party" which saw the NSDAP as a tool to defeat communism, believing that Adolf Hitler would use his power to restore the Emperor to the throne and transfer his power to him.
It's difficult to tell how things would have played out without the crippling reparations but given Germany's actual history I don't think it's plausible that Weimar Germany would have been stable without it even if it was something that fueled the political right's narrative of betrayal. Germany simply did not have a history of democracy to build on.
I think one of the most genius moves following WW2 was to fully dismantle Prussia by restructuring Germany. This was more than a cession of territories, even the parts of Prussia that remained part of Germany were dissolved and integrated into new subdivisions without a clear one-to-one mapping. In modern Germany the strongest remaining notion of Prussia is a general idea of "everything north of Bavaria" mostly present in Bavaria (notably one of the states that remained unchanged after the restructuring - a mistake in my opinion). Prussian identity was inseparable from militarism and a sense of supremacy, even without the formal monarchy.
Another possible move would have been to strip German royalty and nobility of its titles and claims like in France but this would have never been supported by the European monarchies like Britain, which often had strong dynastic ties to these families.