Damn, too bad I didn't know this on Saturday:(

Well, replay until it's fixed :)

Am I right in understanding that the experience from auto-battle goes towards the dynasty weapon experience?

Yes. It definitely does. It's strange that it doesn't go towards the dynasty experience during manual battles in this location. Did they finally fix it?

And are the upgraded crossbows any good?

It doesn't matter. The main thing is that the auto-battle runs without losses, otherwise you'll lose a lot of time. The easiest way to achieve this is with crossbows + weakening (for example, using a "cheesy" level 4 Arachne), because succubi in melee combat return 20% of the damage, and the stupid AI doesn't realize in auto-battle to put a guardian angel on those melee fighters who are hitting them.

Today I'll try to buy a secondary monk and see if I can level up staffs there.