And he also pulls the herbivore dense harem protagonist card who will guard his virginity like losing it would mean the end of the world too while we're at it.
I agree with most of your points aside from this one. Specifically about guarding his virginity.
He went to a brothel to satisfy himself (chapter 5). That's in part why he didn't jump the elf projection in chapter 8 (because he was sexually satisfied not long ago). From the way he was thinking, I guess he used to use brothels for sex in the old continent as well.
... Thought some more, and this part, too.
He literally explained in detail how his skill functions, knowing exactly what it does and how fearsome it is and how abnormal it is, and he still pulls the "Oh I dunno I'm so weak and scrawny and I can't do anything" card on top of the naive optimistic idiot to the point of lunacy card.
I wonder how much he's aware of the buffing side of his skill. The debuffing is very apparent, but the buffs...
Maybe he assumed it depended from person to person?
He can't buff himself at all (so he really is weak and scrawny compared to the buffed up companions), so he has a fighting chance only when he's being actively targetted.
And he won't be able to debuff a foe that has no hostility targetted towards him, as explained with the runaway hobgoblin, that could OHKO him by accident (or the goblin hag, only after aggroing her was the debuff in effect). If an enemy knew about it, sending some AoE attack (not targetted towards him, but in a 'fuck this area in particular' way) in theory could kill him, or have a fight happen in the middle of a natural disaster.
He's probably trying extremely hard (in vain) to convince himself that Ares is a good person, so his skill won't automatically kill him. Basically, a wide-eyed idealist who's becoming aware that there are people in this world that are beyond saving and unfortunately for him, someone he considers a friend is one of them.
If the hero were to be hostile (which is highly likely), Ares would still get debuffed into oblivion regardless of MC's feelings (since it's an
auto skill), so with it being uncancellable as long as the enemy doesn't let go of hostility/give up, I rather think it'd be an eye-opener for our protag in regards to the guy's level of scumbaggery.
The story IMO sets itself up in a way, that I'm guessing the hero will fly off the handle, confess/gloat about what he wanted to do to the female party members, as well as some sort of a 'I can't believe some mob is making me weak, why are you stealing what's mine, I AM THE HERO, EVERYONE SHOULD BOW TO ME, THE PROTAGONIST OF THE WORLD' speech, that would disillusion MC.
He recently learned about the hero being weak, which I guess caught him by surprise since Ares was performing the same throughout (so he had no frame of comparison). It's like he's discovering parts of the guy, that he was previously oblivious to. I sure hope I'm not overthinking that the earlier mention was supposed to plant a seed of doubt regarding Ares' goodness, or as a clincher together with the messy reunion.
My guesses are that Ares either dies or ends up stuck in the dream.
Since the story has someone considering finding a way to kill the demon lord without Ares' hero skill, I think they'll eventually figure something out, whether it's finding someone with holy powers and having them be buffed up, finding some other relic, or MC's unique skill just being that OP, that any party with him would be enough, as long as he can soak up the aggro (since it could be that the big bad would become brittle, but not enough to be killed off by the continous debuffing itself), so MC is a hero without being specifically named one.
In the meantime, MC might feel anxious, since the only known way thus far kinda offed/neutralized itself.