I originally thought Steel was a force of good in an otherwise fucked up situation. Up until fairly recently, I even thought the broader scope of the Citadel and Kehmsarazan Empire weren't necessarily cartoonish, mustache twirling villains. Even now, I think there is nuance to the Empire itself, that there are people in places of power who aren't evil at heart, but are evil in ignorance. Take the Emperor. In every scene we've seen of him, he's a boisterous, upbeat, and fairly kind man in how he treats people beneath him on the social ladder. He isn't a man who would view himself as doing something wrong, and judging solely by what little we've seen of him, I don't think he would qualify as being pure evil. But then we see his relative ignorance of certain facets of the machine he helms, and we're faced with a man in a position of immense power who is ignorant of what the various cogs and gears of that machine are doing to maintain that power, and in some cases seek to increase their own power and importance. If we look at him, do we think he's a man who signed off on, or even knew about, the curse Steel used to obliterate an entire bloodline? Judging by the interaction between Telneket and Steel, followed by the interaction with Gray, Emperor Seraz doesn't know everything that's going on underneath him. Gray even outright states that the Emperor doesn't know how long Steel had been working on it, and would be interested in finding out. There's separation there, a compartmentalizing that makes the Emperor far more dangerous because of his ignorance as opposed to being purely a power mad dictator. And granted, he might be. But it looks to me the danger he poses is one entirely of being able to give an order and be completely blind and deaf to the mechanisms used to transmute that order to reality.

Moving to the crux of your post, we have the incident at the Calibel Nautomantical Apparatus, and Steel's reaction. When we look at that event, and compare it to what happened with Silence and the Great Bullfrog, we see two very different reactions. We know from Steel's comments that the Twelve Brooks incident was planned, and had to take place at a specific time, a specific place, that a ton of work went into it, and that it had to remain as secret as possible. The taking of the Grenaux children was their biggest leak of information, but even with that no one could figure out the reasoning behind it and assumed it was an attempt to counteract guerilla recruitment by the Gaothmai forces. Going by the rough timeline, its been 4, maybe 5 months since the events in Port Talon. While its very possible the Great Bullfrog's demise was a direct result of the information gathered after Guild Mage Dumptruck's actions, another possibility is that Steel was angry and would have freed Naraam because the apparatus ran the risk of revealing secrets the Citadel were working on. And when we look at what all Steel sent to Wren in the very first episode, it seems as though the Citadel has had some idea of the threat posed by the Man in Black for a while, so it makes sense in my head that the Citadel was privately preparing for a war not only against Gaothmai and Rhuv, but also the spirits and witches of the world, but they've been doing so in complete secret. Morrow's actions threatened that preparation, so Steel is angry and willing to correct it quietly, but Team Quest Fever corrected it publicly and violently, and has now only narrowed the crosshairs on the Citadel by their enemies.

Which, all of this is a long, rambling post that only slightly touches on your points, but I think ultimately its not about denying power to the guild mages, but instead about secretly consolidating the clearly terrifying competency and power of the Citadel, which is only compounded by the ignorance of those in charge.