When you say peroxide based boats, are you talking about the Walther boats? If so the peroxide wasn't used to run the diesels. The system known as the Walther Turbine used the peroxide to create steam, in the creation of the steam there was an unused oxygen. Diesel was then injected into the mix and because of the heat of the steam the diesel ignited and created even more energy. This then ran through a turbine which was connected to a shaft, which was most likely connected to a transmission. The entire system was basically a gas turbine engine that provided its own oxygen as well as fuels.
The interesting thing about this form of propulsion, combined with the proposed hull shape of the submarine, is that it could propel the vessel to speeds that would've been nightmarish for anything on the surface, we're talking ~20+. Walther's original test submarine the V-80 set a world record at the time for the fastest submarine at an amazing 28kts. The main drawbacks would of course be the noise, running a jet engine underwater isn't going to be silent, and that it drank very large amounts of fuel, and the peroxide wasn't exactly fun to work with at that purity. I'm sure though that if the fuel economy issue of it was solved, that the advantage gained from the speed would offset the loud noise. One last thing I forgot to mention above is that this turbine would've been a secondary propulsion method that would be activated when attacking/attacked/etc. and would otherwise run on the conventional diesel/electric setup.