Wikipedia says its for keeping the raw dough from turning brown. Alternatively you can use something called "Knödelhilfe" (Dumpling-helper), which is the anti-oxidant Potassium metabisulfite E224. (Kartoffelkloß (German), Potassium metabisulfite).
I have done the recipe many many times without the sulfur, just heard about it for the first time, even though I am German. I never noticed the potatoes turning brown. Typically you grate the potatoes directly into a bowl filled with water and keep them covered.
I'd say either way is ok, the little bit of sulfur dioxide is not going to kill you. Alternatively, try ascorbic acid or lemon juice.
Btw. my favorite type of dumpling is this one, filled with apricots: Apricot Dumplings, Marillenknödel.
They don't have the sulfur issue, because the dough is done with cooked potatoes, and they are covered with breadcrumbs anyway.