Bulow lost the confidence of the Kaiser becuase he could not get legislation passed in the Reichstag.
Think it probably had more to do with the Daily Telegraph interview, but that's neither here nor there. The key point is that he resigned because he lost the confidence of the Kaiser, not because the Reichstag removed him. It couldn't. Which, as far as I'm concerned, says it all.
The fundamental difference between Britain and Germany in 1914 was that the government in the former was accountable to the electorate, while the government in the latter was not. The former was a country that was quite clearly democratising (if at a rather slow pace) even if it was not yet what I would came a democracy, while the latter was an authoritarian regime that derived its power from the military and which also happened to have something of a parliamentary facade (and not a very good one). Of course, elections in Germany (at least at a national level; regional and municipal elections were something else entirely) were more democratic than elections in Britain, but that's only part of the picture, and perhaps not the most important one.
As an aside, while calling Britain, France and Italy c. 1914 'democracies' is a questionable (especially the last one!), they were all liberal states at a fundamental level and in a way that very few countries outside North America are these days.
You miss the point of later reform efforts. Since the struggle over the People's Budget, the House of Lords has no real power; it can block and it can amend, but it cannot vote anything down. Even it's blocking and amending can be defeated by the Commons. Later reform efforts have focused not on what it does, but on how it's members are elected (or, rather, not). In the long, slow process of democratisation in Britain, the castration of the Lords was one of the most important events. And it perhaps shows a fundamental difference between Britain and Germany in the period in question; in the latter the landowning classes still called the shots. In the former, they'd very recently lost almost all of their power as a direct result of the repeated electoral defeat of their backers in the Commons.