However, I'm not convinced that Nii is the evil protagonist, exactly - I think he's as much a pawn of the Merciful (!) Goddess as anyone. I have this growing feeling that she's out to teach Konzen/Sanzo a lesson of some kind, and that Nii, Koumyou and all the others are part of her game, wittingly or otherwise.

Yes. This. Because when it's your nephew's soul that you're playing with, you're going to take a close interest.