It's understandable that Railag hates demons. What's not understandable is this: in the form of Agrail, he actually treats demons very favorably (I'm not talking about Kha-Beleth). In the 4th mission, playing as the demons, he needs to capture an elven city with a shipyard, and he enlists the help of demons. But if Railag is an elf, albeit a dark one, then he cannot change into a demon. Therefore, the conclusion is that he is actually a demon. After all, Biara also transformed into Shadia. So, the disagreements will remain.
Then, regarding Markel. I think the scriptwriters introduced him not only because they wanted to allow players to play as necromancers. He (Markel) seems somewhat superfluous, because, as I understand it, Kha-Beleth made his "investment" in Isabel at her birth. So, Markel disrupted his plans. And also - Agrail kills Nicholas, and before he dies, he demands that Godric swear that he will obey Isabel as queen, since there is no heir left. What prevented Agrail (specifically Agrail, not Railag) from waiting for a proper heir to appear, who, according to Kha-Beleth's plan, would become the Messiah of Evil? After all, Agrail is coming to Tier for this very answer. He doesn't know about the Messiah before killing Nicholas.
I know about "Lords of the Realm," but I can't buy it yet. I'm stuck on the first mission of the Dark Elves in "Lords of the North."