I think you're asking two questions: why were such harsh conditions imposed, and why did Germany accept.
As for why they were imposed: "Some also argue that the treaty was meant to permanently render Germany useless as a military might […]" — Perhaps not totally, but I think this is the answer. It's what the French wanted, and their security concerns won out over Wilson's ideals in the negotiations. The Maginot Line stands testament to France's fear of another German invasion, and I don't think revenge—or the political necessity of satisfying a public thirst for revenge—can be discounted either.
As for why Germany accepted, this diary entry by Albrecht von Thaer on October 1, 1918 recounts Ludendorff's own assessment of Germany's position at the time.
He said approximately the following: it is his duty to tell us that our military situation is terribly serious. Every day it is possible that there might be a breakthrough on the western front. He has had to report this in the last few days to His Majesty. For the first time, the O.H.L. [Oberste Heeresleitung or Supreme Army Command] was asked by His Majesty, as well as the Chancellor, what the O.H.L and the army is still capable of accomplishing. In agreement with the Field Marshall, he responded: the O.H.L. and the German army are at an end; the war can no longer be won; indeed, a total defeat can probably no longer be averted. Bulgaria has fallen. Austria and Turkey, at the end of their strength, will probably soon fall as well. Our own army is unfortunately already badly infected with the poison of Spartacist-socialist ideas. One can no longer rely on the troops.
By 1918, both sides were developing strategies and tactics which had failed so far to, but held the promise of, breaking the stalemate (co-ordinated tank and infantry attacks, stormtrooper units). The Spring Offensive was Germany's last chance to put these in effect with anything close to the logistical support and number of crack troops they required—in the event, it wasn't enough—and its failure meant that the best Germany had to look forward to was defeat by attrition accelerated by the arrival of the US.
Furthermore, the Treaty wasn't signed until June 28, 1919, about seven and a half months after the ceasefire. During this time the Allies maintained their blockade of Germany, many starved (a source in that article suggests 100,000 civilians, though the Allies made attempts to allow food into Germany), others succumbed to the global influenza pandemic (which, all told, killed more people than the war killed combatants), and the country descended into paramilitary street fighting and revolution.
So Germany never was in a particularly good bargaining position (all they could offer was to abbreviate everyone's suffering), and was by 1919 utterly at the Allies' mercy.
I don't know enough to form an opinion on this, but here is Sally Marks on the historiography of the aftermath of WWI: (superscripts omitted)
For nearly forty years, historians of twentieth-century diplomacy have argued that the Versailles treaty was more reasonable than its reputation suggests and that it did not of itself cause the Depression, the rise of Hitler, or World War II. Their efforts have had little effect, despite Margaret MacMillan’s best-selling Paris 1919. The distorted view of The Economic Consequences of the Peace and J. M. Keynes’s other works still dominates both the Anglo-American historical profession and the English-speaking educated public, though Zara Steiner pointed out in The Lights That Failed that the Versailles treaty was the mildest of the 1919–20 settlements.
After a long, bitter great war, losers are rarely treated as victors. Germany’s military collapse has been downplayed. Last battles count most, and Berlin sought an armistice in hope of regrouping to fight again only when its army neared disintegration. The Armistice of November 1918 was in fact a surrender, but the Allies, without thinking, retained the German term implying only a cease fire. That was the first Allied mistake. The text required a rapid military withdrawal that only the German army could accomplish, which gave it great influence in the nascent German republic. Franco-Belgian yearning for liberation rendered that requirement hard to avoid.
While the Four imposed losses and constraints upon Germany, many of them temporary, they allowed it to remain Europe’s greatest state politically, economically, and potentially militarily, for they never really faced jointly the extent of German power and the possibility of its hostile use. They can be faulted for the ostensible and psychological as well as the real burdens they imposed on Weimar’s democrats; the insufficiency of enforcement clauses; ignoring the risks of imposing a victor’s peace without a united will to enforce it; the treaty’s numerous pinpricks but relative moderation on many key points; their necessary haste and unnecessary disorganization; and leaving Germany dominant on the continent—indeed, when the bonds of Versailles dissolved, more dominant than it had been before. Above all, by the crucial combination of their failure to ensure that Germans understood their military defeat, their consistent avoidance of the big questions, and their neglect of aspects of German power, the victors inadvertently provided the preconditions for what one Weimar official termed “the continuation of war by other means.”
Marks, Sally. "Mistakes and Myths: The Allies, Germany, and the Versailles Treaty, 1918–1921." The Journal of Modern History 85, no. 3 (September 2013): 632-659.