Duzen and Siezen

Well, living in Germany is sure an experience, but there's one thing as a native English speaker that I've never gotten used to: duzen and siezen.....

What do these mean?
Well, duzen means to use "du" to say you (in German), which one typically says to friends, colleagues, kids, dogs, buddies, classmates, basically anything in a social setting.
And siezen means to use "Sie" to say you (in German of course), which one typically says to clientele, service personnel, adult strangers, elders, etc. Basically much more polite, something one would use in a formal or official setting.

The problem is that there are many cases where the line is very fine between "du" and "Sie". In my group we all "duzen" each other - which is good, because it removes the awkwardness and distance that "siezening" someone creates. Except for my boss and the secretary. And also an older professor who "siezens" everyone else.....but that's really strange, especially when everyone's saying the familiar "du" until speaking to this older professor (or my boss and his secretary speak with each other).

Another weird scenario was when we visited some friends, and the mother-in-law of the guy is around 70-80 years old. Her son-in-law told us to just use "du", but when we did so, she "siezened" us back....what should we do? If we continue with "du", we are being impolite, but if we use "Sie" there's an awkward distance created, and as well, its kinda strange to take back "du" and then continue with "Sie".

Textbooks tell us to use "Sie" when in doubt...but using "Sie" when you should use "du" presents a very awkward formal situation that's also weird......maybe I'm too North American, but I really prefer the "du", and perhaps start with "duzen" a bit too quickly.......

But I also think that some Germans need to be a little less uptight about this thing, and just relax and go "duzen" someone! I would say that Germany is the most strict at the "duzen" and "siezen" separation for a European country.

Thank God I don't live in Japan! (How many people would I offend a day?)