The man on the beach was fishing for eels by tying a horse's head, presumably thrown away at the local slaughter house, to a rope and casting it into the sea, to be attacked by eels.
The scene works to set up the confrontation between Agnes and Alfred, who appears to have finally had enough of the relationship between his wife and Jan -- though he relents and sends Jan in to, uh, comfort her. This marks the beginning of the end for Agnes, who proceeds to die of eating fish and listening to Oskar's incessant drumming. (In the book, Oskar later regards himself as having killed his mother by drumming her to death.)
She committed suicide. How? they never said. I did not understand the 'overeating/binging fish' part. What's it supposed to represent? I mean I was becoming nauseous after a while looking at her. I don't think I'll be having sea food for some time.
It was a horses head. This is the bait local fishermen used to catch the eels and fish they would later sell at the market.
As well as being a striking image from a directing point of view, I think it was also an allegory for how the German people saw Nazism after they no longer had ignorance as an excuse.
Agnes is repulsed by the sight and is physically unable to eat fish anymore. Alfred, her Nazi party husband, tells her to stop being hysterical and that nothing has changed. The fish on her plate is the same as it has always been. She had no problem eating it before she knew how it was caught. What they are really talking about is the Nazi party and how millions of people like Agnes were willing to blindly follow it until they found out what it truly stood for, even if they always knew in the back of their minds that it wasn't pleasant.
Thanks so much for this ; the allegory helps to see further. It was clear there was more to it than just what we were seeing ; now I can analyze better.