Hey SkrillRKnight,
I'm not part of the Narrative team, though I can give you my interpretation of Xerath's short story.
Short Stories: Xerath—Unbound: http://boards.na.leagueoflegends.com/en/c/story-art/RdkEIREJ-short-stories-xerathunbound
You may also be able to find a lot of your answers in the link below. =)
Azir and Xerath Story Discussion: http://boards.na.leagueoflegends.com/en/c/story-art/AAFWPAP0-azir-and-xerath-story-discussion
1. After reading Xeraths lore, I'm wondering, is he a real bad guy?
It depends on who's perspective you're looking from. From Xerath's perspective, he was punishing an injustice against a man who had promised him freedom, but who had never given it to him. Xerath wanted the power to free himself from being a slave, and was also tearing down a decadent society built on the backs of slaves. Perhaps he believed that he needed to destroy Shurima in order rebuild it up again, and that he would be the one to do it. Things didn't turn out as planned, but perhaps you could understand where he was coming from.
2. So he plotted for the Ascension to go right, but also go wrong for Azir, or himself?
He plotted for the Ascension ritual to go wrong for Azir, but right for himself. He wanted the power to free himself and to destroy Shurima, possibly rebuilding it to where he would be the new emperor.
Though due to his tampering, he corrupted the Ascension ritual. That's why the being that he turned into was a more unrefined form of magic, compared to animal-characteristic beings like Nasus, Renekton, and Azir.
3. At the end, Azir frees him. Here is where I get confused. Does Xerath feel guilty?
Xerath may have had regret at the time, but he had already set the gears in motion for Azir and Shurima's destruction. He believed there was no turning back from what he has done, and followed his plan to its completion.
