You know what might help, a little bit, discussing this sort of thing, is to decouple it from "Nazi" support. Are we or are we not talking about Hitler's National Socialist party here? If we are, it is deeply racist, embraces a nihilistic ethos of war as the natural state of human life, celebrates murder and absolute obedience to the whims of some mystically alleged to be Chosen dictator.
It is not logical for Nazis to support solving problems without stepping on people's toes by means of industrious labor. That's not what Nazis are about. Nazis are about basing society on the ethics of apex predators and treating most of humanity as prey.
So if "Nazis" were the major sponsors of Atlantropa, we already know up front just from that it is a bad idea. So it should not surprise us that the details have, shall we say, negatives.
Now then, I can well believe that there were quite other Germans than Nazis who were excited by this project, because unlike Nazis they did have scruples. They did understand that if you go around reorganizing the living conditions of other people on a continental scale, you owe them something--compensation at least, a place at the decisionmaking table, and in fact as noted, if it is "Lebensraum" for someone, it isn't for Germans anyway. (If the Austro-Hungarian Empire had not collapsed, at any rate there would be that German, more or less, outlet onto the Med).
Look at it fundamentally; the idea that the solution to any nation's population expansion is to expand onto "new" land is just fundamentally wrongheaded. At best that is a temporary solution, then growth fills the new land and you face the same problem once again on a bigger scale. Land area is a given; rising human populations can in fact use the greater labor power this population represents to work the land they have more intensively, and meanwhile a solution that is sustainable is for population not to grow so damn much! And in fact, it turns out that if we just respect women as equal persons, and leave the question of how many babies each one is to have to herself, population growth does slow down, as each woman considers seriously the question of how many children she can afford to care for. If she can care for more, and also chooses to go through the risks and pains of childbearing and the heavy time and energy drain of caring for young children (I do a fair amount of that myself lately, and it has its rewards--but face it, it is a major time and attention sink!) then having calculated shrewdly, we can see that piecemeal, the rate of population growth is being regulated to match her society's economic carrying capacity.
The reason "Nazis," and other people less vile but I fear basically wrongheaded in their thinking on this, were obsessed with this kind of expansionism was that they wanted German population to grow without limit, the better to beat down and exploit other people. The less cruelly intentioned "Lebensraum" types were clearly half baked in their thinking and I suppose these were people who resisted the idea of women's liberation to control their own lives and assumed large birth rates were some kind of virtue in themselves. But clearly that kind of thinking has no sustainable solutions, and leads straight to war and brutal exploitation of others as the Malthusian solution to the problem. It makes sense for Nazis to think this way, because they were on the side of the Four Horsemen, thinking they could harness them to turn on other people.
But then, why labor so heroically (and futilely) to create desiccated salt dust bottom lands of little use to anyone, and ruin perfectly habitable land all around it, when frankly you can just go steal someone else's more or less decent land that already exists? This is of course the real Nazi solution.
I suppose other people, less vicious in their intentions, looked to this as a solution and kidded themselves into avoiding facing how it still amounts to a land grab of other people's homes, pointing to the exposed sea bottom acreage as new land but sidestepping how much they are screwing up other people in the process, and thus kidded themselves into ignoring how poor the new land they were proposing to create would be. But this is not a solution to a problem that can be solved in this way!