Why does German use the third person plural for the second person polite?
German has three sets of pronouns for the second person: the familiar singular (du), the familiar plural (ihr), and the polite singular or plural (Sie). The polite form is identical with the third person plural, except that the pronouns are capitalized. It's different from the third person feminine singular, which is also "sie" in the nominative but differs in the other cases.
This is a relatively recent development; as far as I can pin it down, it started in the 19th century. In earlier times the second person plural was used for polite address, as in French. My question is how it came to be the way it is now.
Addressing a person with a third-person pronoun seems impersonal and rude to me. In fact, at one time German used the third person singular (er) as the second person for addressing underlings. This occurs, for example, in Hofmannsthal's libretto for the opera Der Rosenkavalier, where it may be an intentional anachronism.
It's also confusing; I've found in my personal experience that it's sometimes hard in conversation to tell whether "Sie" means "you" or "they." Yet the "Sie" form somehow became the preferred form of polite address. What process led to this?