I have read that one of the Yeke minhagim at weddings is for the chatan to walk the kallah, hand in hand, down the aisle to the chupa. This takes place before the wedding itself. However, although the minhag of Yekes is fairly lax when it comes to physical contact between the two genders, this is limited to necessary contact such as shaking hands. Walking hand in hand is considered to be more intimate than mere hand shaking, and so should not be permitted except when the couple is married. If so, what is the basis for allowing the chatan and kallah to walk hand in hand prior to the kiddushin?

Never heard of such Minhag, if it does exist – it should be canceled. There is a real Minhag for the Chatan and Kallah to walk holding hands after the Chupah to the Cheder Yichud, that I believe is the custom you are referring to.