Although Union Berlin has performed better this season, it is not an easy thing to beat Dortmund even though Union Berlin is playing as the host.
So far, Union Berlin have only lost once away from home to Frankfurt. today Union Berlin will be busy with the Europa league match against Malmo, two days later Union Berlin will host Dortmund. quite a tiring match I think for them.
You describe very well the problem that I generally see at Union Berlin: the staffing level. Due to the triple burden (EL, Bundesliga, Cup), the load per player is enormous, which will inevitably affect the team's performance, at the latest in late fall shortly before the EL break. This is much less of an issue for teams like Bayern, where the extended squad is also very strong, but smaller clubs like Union Berlin can hardly afford that.
In my opinion, it will be very exciting to see whether and how Union Berlin can maintain its current performance in the late fall.
I do agree that it takes a toll on players and it may take a while before people could end up with doing something that could make sense. I mean staff do not feel ready for that many games neither, it means 2 games a week like for a long part of the season, and considering the world cup is in the middle of the league, it’s going to be a year where players are more tired than usual.
This is why I am not sure that we are going to end up seeing Union Berlin really ever recovering. They may or may not get good results in the league eventually, but cup and EL should be gone from their heads, they won't win it, so there is no reason to focus on it at all.