>>30462486she was never "good" it was always selfish and then she just stopped caring at a point. It also wasn't the possession that caused her to become evil thats just who she was. The reason she thought lillie became beautiful is because she stopped being a weak doll and managed to achieve beauty in her eyes
I don't know how you came to the conclusion that she was possessed the entire time, theres really nothing in the story that implies that. Theres even more story elements that outright deny that possibility.
