I've done some research regarding U-boats so here are some possible upgrade paths.
The first u-boats were Diesel-Electrics, similar to WWI u-boats. They spent most of the time on the surface. In the wolf-pack tactics they attacked surfaced at night. They only submerged for daylight attacks or when evading enemies.
When surfaced they could travel quite quickly. When submegred they could only travel very slowly and thus had an extremely limited range. For instance, when surfaced the Type VIIC had a speed of 17.7 knots and a range of 8500 miles. When submerged it had a maximum (and inefficient) speed of 7.6 knots and a range of only 80 miles.
This had important implications. If a u-boat attacked, the allies knew that it had to come back up for air within an 80-mile radius of the attack.
The allies used aircraft to hunt for the surfaced u-boats. But the u-boats usually managed to submerge before the aircraft could attack. The critical development was that of putting radar on aircraft. Now the allied planes could spot u-boats long before the u-boats could spot the planes. The allies started to hit the u-boats before they had time to submerge. This is what defeated the U-boats. Most u-boats were sunk by aircraft.
In response the germans developed some technologies. They developed the snorkel, which allowed u-boats to recharge the batteries while submerged. The snorkel produced a radar signature but it was greatly reduced and they were at least already submerged. They also developed radar detectors and anti-radar coatings.
But, more importantly, they were working on the Walter u-boats. These were to use hydrogen peroxide to operate at full power while submerged. It turned out that hydrogen peroxide was too expensive to use in u-boats as the main fuel. But the Germans designed u-boats meant to use hydrogen peroxide temporarily. The fuel was also problematic to handle as it was very explosive. So these Walter boats were not ready by the end of the war.
In the mean-time the Germans improvised. They took the space meant to store the hydrogen peroxide and filled it with batteries. This led to the electroboats. These were equipped with the snorkel, and could travel submerged for about 2.5 days before recharging the batteries and they could also fully recharge the batteries after only a few hours on the snorkel. They also used a hydrodynamic hull, which allowed them to travel faster underwater than surfaced. Thus, the type XXI had a surfaced speed of 15.6 knots and a range of 15,500 miles. Submerged it had a top speed of 17.2 knots and a range of 340 miles.
Notice that they could now travel for 340 miles, instead of 80, while submerged. They could also stay submerged for 2.5 days. This made it much more difficult for the Allies to hunt down the electroboats. Their great underwater speed also made them very effective in underwater attacks.
The electroboats could have turned the tide of the u-boat war in favor the Axis. They came too late and in not enough numbers as to make a difference. But, the question for a scenario is: What if they had come earlier? The Germans could well have built electroboats in 1939. The snorkel had been invented by the Dutch, which was occupied by Germany in 1940. The reason the Germans didn't develop them earlier was simply that they didn't need to until the Allied air attacks became overwhelming during 1943. The technology was not all that sophisticated(hydrodynamic hull and loads of batteries). All that was needed was the will to develop it.
So I think that techs leading to snorkels, electroboats, and finally Walter-type boats shoudl lead to new submarines.
I see a possible upgrade path:
Diesel-Electric
Snorkel-equipped diesel electrics
Electroboats
Walter boats
Note: If the scenario allows the axis to develop nuclear weapons, then, if they develop fission, they may also develop a nuclear reactor, since the German nuclear program was more aimed towards a reactor anyways. In this case a nuclear sub may be a remote possibility.
Depending on the depth of the scenario, one may want to add coastal subs, anti-aircraft subs and the like. An interesting possibility may be the milk cows, which migth be able to heal other u-boats but not have an attack ability.
Possible techs:
Axis Technologies:
-Wolf-pack tactics
-Snorkel
-Electroboats
-Walter turbine
-Anti-radar technologies, like anti-radar coating
-Cracking allied convoy code
-Homing topedos (invented by germans during WWII)
Allied techs:
-Convoy tactics
-Airborne radar (permits construction of anti-submarine bomber that can spot u-boats that are not electroboats)
-Cracking Axis submarine codes
Possible wonders:
Cracking Allied Convoy Code (also maybe a tech): Reveals position of Allied transports
Cracking Axis U-boat codes (also maybe a tech): Reveals position of U-boats or increases chances of their detection since revealing all their positions may be overpowering. Alternatively, it could just reveal the location of boats that are not electroboats.
Submarine mass-production: Reduces u-boat construction costs by 50%.
It may also make sense to provide defences against the cracked codes.
Regarding the cracking of the allied convoy code, it is a little known fact that the Germans cracked the code the allies used to route convoys. So the Germans knew where the convoys would be ahead of time.
Another little known fact: The u-boats shot down a surprising number of allied aircraft. They even had some anti-aircraft u-boats. In response to allied air attacks Doenitz gave an order to shoot back at the Allied aircraft if they did not have enough time to submerge. This order was later rescinded.
Yet another fact: At the end of the war the Allies seized the Electroboats and Walter boats. They copied the hull design. This hull design was used in the Nautilus. They just put a nuclear reactor where the batteries should have been.
Good sites:
http://uboat.net/
http://www.ubootwaffe.net/