I THINK what happened is whatever Mu Su did to buy time to escape (she spat something in his face, maybe synthesized poison?) crippled Lao Wu for a bit by taking out his eyesight, giving her enough time to escape and rescue the Old Thief, Scientist, and Bunnies.
I think the fast flashback it cut to wasthe Monk was before he became the Divine Sinner Lao Wu, or someone he knew (could be either), since the Legend of the White Snake involves a jealous tortoise breaking apart a pair of lovers among other things, and Wei Wu had a Generally Cute Lady smiling up at him in the flashback before it cuts back to Lao Wu crying before guzzling an incredibly rare drug/herb/herbal drug.
So, best guess I've got is Current Jackass did Something to either corrupt Wei Wu the Monk and next Super Buddhist Leader, or he's got him held captive somehow and Lao Wu is his lackey to try and buy his freedom.
Third guess I've got is that Lao Wu is the son of Wei Wu the Divine Monk and General Pretty Girl, and Jackass Family Head Qin has something on him to make him a dog of the Qin family (only shelter he had for being a half-blood Divine Race, he has his mother held hostage, etc), since Legend of the White Snake mentions the son of the White Snake and a Monk, and his being smuggled away when the jealous Tortoise imprisoned his mother in the temple that was referenced.
Old Man Qin's reference to 'all of the divine race are monks, but there's always some who sin' could just as easily be 'one of them knocked up a human' as 'he became a crazy murder monk'. Also, since he mentions 'controlling' Lao Hu, it sounds like Something is wrong with him and he's addicted/hooked on/requires Silver Flower Essence.