In the book the plot of the underground militant resistance, to which George belongs, is much more developed. There's a secret organisation engaged in spying on enemy troops and collecting information about their movement and in the acts of sabotage, like blowing up railway transports for the German occupying forces.
Apparently, as you can see in the film too, the British militants are also ordered to eliminate people who they think collaborate with the enemy. The novel describes how one or two of militants hiding places was discovered by the Germans and the men they caught were executed, which you can also see in the film. Also a woman at the country fair tells how some others that tried to sabotage a railway transport were captured and killed.
Men from the village disappeared because they decided to join in and they disappeared secretly and didn't tell anything to protect their relatives.
As to George and his shooting of the colt:
He recognised the boy who run the colt for Maggie at the show - he earlier saw him driving the German military vehicle and he knew he was a German soldier. Besides, he and other people around saw him (he didn't stand close enough to hear what he said)speaking to the colt, and knew he wasn't mute due to a shell-shock as Maggie told people. Besides, it was known that William, Maggie's husband was caught and killed during some sabotage mission on the railway, while she was still telling people he had stayed on the farm to work.
Since then Maggie was officially thought to be a collaborator and George was earlier ordered by the resistance organisation he worked for to shoot such people. But he hesitated, because circumstances were such, that everybody who tried to live on had no choice but to, in one way or another, coexist with the German soldiers. You couldn't kill everybody just because they want to survive. That's why he eventually kill the woman but directed the bullet into the animal's head. I don't know if he realised what consequences of his actions, but his superiors should've known better than going around killing their own people for trying to live normal lives and feed their families and themselves. I think at this point they were doing very bad work and not helping to chase the Germans away, only making civilians' lives harder.
Concerning Sara's feelings - I think she tried to be no more than polite to him and accepted his help, knowing that without it you would be lying somewhere buried under the snow or starving to death. She loved and missed her husband all the time, even though she was angry at him leaving her like that. She strongly believed he was still alive, although it was becoming less and less probable (Maggie didn't tell her about her husband's William's death of which she learned at the country show, and a possibility of other men ending the same way). After a few months she was mentally exhausted with the waiting so when one day the German captain came and told her she must choose whether to stay and get killed by some really nasty troops of his army, or just leave it all behind (becoming an ultimate traitor in the eyes of everybody that you've ever known and loved) and escape with him to America she lied to him pretending to agree to run away with him, and instead left on her own, almost hopelessly trying to find her husband. Or die trying, in hope somebody finds her body with the journal she wrote for Tom all that time.
The letters? Captain never meant to deliver them, fearing that just their appearance might bring the attention of the German bureaucracy and army superiors to them and the place in which they stayed, and they will have to leave it. Deep under his skin he was aware that sooner or later the women's husbands will get caught and there will be a reprisal directed at the women resulting in their deaths, but before that would happen he was hoping to stay there as long as possible, away from the war. The censoring of the letter which you can see in the film was just for fooling of the other soldiers, so they would think their families get the messages from them.
Personally I keep wondering if the letters sent to the women in the valley, on which captain wrote "Deceased. Return to Sender" contained any information about the capture and deaths of their men. But even if they don't this action had to make George suspicious of what was going on around the place, after he saw Maggie on the show, her apparently not being deceased at all.
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