What exactly was the point of the Nazis capturing Indy's dad and keeping him locked up at the Austrian castle?

He was their hostage because they were really after his Grail Diary, but since he'd posted it around the world to Indy in the US to get it away from him and the Nazis, they held on to him as he was the next best thing to the Diary, and could torture him for information if they got desperate. But then again, it wouldn't do anything as he wrote everything down in the Diary so he didn't have to remember it.

I still think Henry would've been rather pissed, or even amused that Adolf Hitler signed his Diary!

^^that^^

Additionally, there was also the possibility that Indy would come back to rescue his dad and have the diary with him..

They were proud of the castle's many tapestries and wanted to show off to show them off to Henry, Sr.