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I would argue that he is evil, but that he is passivley evil. Freddy is actively evil, he goes looking for trouble; pinhead is content to sit and wait for someone to bring evil upon themselves. However, he isnt an animal, he is a concious being that knows what he is doing is immoral, despite the fact that they technically asked for it. The fact that he is ambivelant about the fact that many of the people didnt know what they were getting into suggests evil; letting a child drink Drano "so that they'll learn better" is an act of malice, so the same goes here.
He also always seems to wind up getting innocent third parties involved and doesnt care about collatoral damage, which is also evil. So, is he the villain, technically, you are correct, he isnt, he merely reacts to the actual villain. But, he is a "bad guy".
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