I actually found him to be the most terrifying character in the books, and he adds a lot to the Proyas/Great Ordeals storyline. What makes that storyline interesting is how alone Proyas are and the enormous struggle of leading an army that also slowly goes insane while struggling to remain sane himself. I thought it was a huge turning point Kayûtas just murdered one of the lords, seemingly surprising even himself. His reaction also seemed to show that it wasn't a calculated decision and he that had gone crazy just like everybody else, leaving Proyas as the only semi-sane person in the Great Ordeal. Its a huge difference between having this superhuman on your team and having him as another lunatic you need to control, which seems like an impossible task given what Dunyain are capable of. As the story progresses he becomes this devil on Proyas shoulder, using his intellect to justify his insanity and actually making himself and others believe they doing the right thing. I think this is a far more horrifying portrayal of what an insane Dunyain could be than Inrilatas. Someone who not just heaps damnation upon himself but corrupts everyone with his superhuman powers of persuasion.
Well, the quote you used at the beginning was mine so you might know how I feel already.

Kayûtas succumbing to the effects of Sranc meat was one of the things that made him a bit more interesting in my eyes, actually. While personally I still don't find him that interesting as a character, I can see where you're coming from with his influence on Proyas - the thing is, Kayûtas as the manipulator was cut short by Kellhus' return. If it had gone on, maybe I would agree more, but I just can't see him as being that terrifying.
And there were definitely some underlying emotions there, with him trying to stop Serwa to go back and fight after she'd been hit with the blast. This book did flesh out his character a bit more than previous ones, but it was just not enough for me. Maybe I'll change my opinion after a reread, maybe not, this is one of those cases where your mileage may vary.
