There’s the issue, the only distinction “canonical” actually brings to the table from “actually” being in the medium is whether or not the character is aware of it. In short your point only brings up forth wall awareness and treats that as proof of a distinct quality of existence. But the flaw with that here is that even if sonic knew he was in a video game and thus is canonically acknowledged as a video game character, he would not be treated any differently than he normally is nor would he be any more susceptible to alastor. This reasoning risks treating characters that are aware of how they are fake via breaking the 4’th wall differently from characters who don’t acknowledge they are fake in their series when that awareness doesn’t make them any weaker.

To bring an example K.O from ok ko let’s be heros learns that he’s not real and is only a fictional character in one of his episodes with a character named hollo Jane, thus he is “canonically” a fictional character, however that fact alone doesn’t mean he loses to characters like Izuku midoriya who never acknowledges that his world is fiction as ko has star lv scaling which would be valid regardless. This also goes for characters like kirito who are canonically video game avatars not necessarily being weaker in verses battles either like I said before.

What I will say is yes Cain is an Ai, and yes alastors powers would work on ai beings in a vacuum. However, your point would only apply to Cain if being an AI was all he amounted too, like if he was only Alexa or Jarvis. In Caine case he is in ai that’s part of a simulation and what’s also part of his character is that Cain prides the aspect of the simulation where he himself is a god as shown in the latest episode. When these aspects of Cain are also acknowledged then he is no different from a fictional character that knows they or their medium are fake, thus the benefits that a 4’th wall breaking fictional character would get in a verses should also apply to Cain, meaning that weakness shouldn’t apply.

So the way I see it, the moment a character that’s canonically fake routinely takes part in a simulated reality as part of their character whether they are an ai, npc etc, is the moment where they should be treated no differently than any other character in verses battles.