As I'm sure you are aware, there are many varying views on this subject. My veterinarian is also a good friend and he and I have discussed this issue several times. I've owned two German Shepherds and wouldn't hesitate to own another, but our changing life style suggested that a large dog wouldn't be pratical.
Hip dysplasia is not unique to German Shepherds. It's fairly common in all larger breeds. Lack of hip dysplasia in a generation or even two or three generations is no real predictor or guarantee of future occurrence. A study in the mid-1970's at Cornell University here in the U.S. found that about 30% of all German Shepherds were likely to have the disease. In fact they concluded that if a higher rate of xrayed dogs were studied they felt as many as 50% could be affected.
My vet believes that a contributor to early onset of HD is rapid growth. But he also says that rapid growth is mst often caused by the puppy being overfed.
He cited an action among breeders in Germany. In the mid 1960's they were seeing a rate of about 26% HD in the breed. After 40 years or so the rate is down to 7% due to the Germans instituting mandantory Hip Dysplasia x-ray submission for German Shepherds before they can ever breed or show for a Championship, beginning in 1966. All German Shepherds in Germany must be tattooed by an official of the SV (Deutscher Schaeferhund Verein ) before the puppies can leave the breeder at 8 weeks of age. (I found the similar information at German Shepherd Kennels ).
Here in the States, a breeder "guarantee" doesn't assure no HD, but rather, describes the breeder's responsibilities if it does occur.
So...I'd suggest breeding the female, restricting the diet of the puppies and monitoring them as they develop... Best of luck!