Mr Trick
Scooby
No - it's part of the script - the Thessulac intensifies the normal human feelings. Yes, they had all the normal range of feelings and insecurities but this was a feedback loop designed to make the paranoia turn into hatred and violence.
Thesulac: "Well, I don't know about you (laughs) but I'm stuffed! God I love people! - Don’t' you? (Laughs) they feed me their worst and I kind of serve it right back to them, and the fear and prejudice turns to certainty and hate, and I take another bite and mmm-mmm-mmm! (Laughs) What a beautiful, beautiful dance! (Moves down from the landing towards Angel) Oh, you got your feelings hurt, didn't you? See now what happens when you stick your neck out for them? They throw a rope around it! (Angel starts to walk towards the door) And you thought you'd made a friend. News flash! You *had*! (Angel stops but doesn't turn around) That's what made her the *yummiest* morsel of all. (Laughs) You reached her, buddy! Restored her faith in people. Without you she would have been just another appetizer. But you plumped her up good! Now, she's a meal that's gonna last me a lifetime! (Laughs then drifts closer towards Angel's back) Hey, you know what? There is an entire hotel here just full of tortured souls that could really use your help. - What do you say?"
We hear some indistinct whispering, then nothing but the sound of the demons tentacles whipping back and forth as it waits for Angel's answer.
Angel without turning around: "Take them all."
They humans were as much under the influence of the demon, as Angel was under the influence of his. At least he knew what was going on - they didn't. But Angel was as vulnerable to the Thessulac as they were. He looked for a way to kill the demon, but once Judy turned against him - even knowing what was going on and why she did - he acted on his own worst impulses, instead of doing what was right.
Wesley: "The hotel officially closed its doors on December 16th 1979. On that morning the concierge, Roland Meeks, made his morning wake-up calls with a twelve gauge shotgun, room to room. It's been empty ever since."
The hotel closed in 1979 - and Angel was there in 1952. That's 27 years worth of murder he could have prevented with gasoline and a match.
Did he though? I agree he may have known that something was a foot, but I'm not totally convinced that he knew the details per say, at least not before the demon revealed himself to Angel post-lynching. I still think blaming in on demon mind control/powers is passing the buck. If the demon is drawing on already existing human emotions then the humans themselves have to take some responisbility.