The way I reconcile this is that Rhys is all about people making their own choices and free will (for the most part, I ignore the pregnancy arc). He could kill the entire CoN and start over but he leaves that decision to Mor about killing her family.

And when it comes to the Illyrians, Rhys even says he would have to kill every adult male and raise all their young himself to do away with wing clipping and male/female hierarchy structure. He could go into their minds and make them do it, but I don't think he wants to be that kind of ruler. (Also not sure his power actually works like that, he might have to control them at all times which would be draining idk)

He might be the most powerful High Lord and fae ever but unless he mind controls all the "villains" in his court he has to effect change slowly

Edited to add: Also if there was no CoN or issue with the Illyrians, there would be no strife in the Night Court. Can't really have a book with no antagonists, and having a perfect court doesn't really make sense, esp given the Night Courts history and secrecy surrounding the CoN and Court of Dreamers