1. Yes. The aspect of the Lord of Chaos doesn't fully awaken, or at least doesn't take over.
2. Damian is still human, and in the history of Beyond Divinity (which you'll learn about as the game progresses) and in Divinity 2 he acts primarily based on his own motivations (pretty much with a maturity level arrested at 15 (IIRC), when he saw his girlfriend being executed by his adoptive father).
3. It is primarily Nemisis in Beyond Divinity, with a couple instances of it being spelled Nemesis in books, etc.
4. Damian will use arch demons not powerful or smart enough to need to ally with.
5. Damian is the human embodiment of the god of the demons, whom the Black Ring had long since allied themselves to, so he is essentially the saviour to both. He is the one destined to lead them out of exile, restore them to their former glory and finally achieve revenge on their enemies.
