Honestly, I think they handled Azshara about as well as they could have in an expansion that denied her the screen time she deserved. This is a character who is 90% style and they got that part down pat. Where she suffered was in the gameplay requirements imposed upon her - A) Her zone is just an island instead of a continent B) Her zone is a x.2 island which means it must have inexplicable rep factions running around and C) She is a Raid Boss so she must fail. But all that could easily be corrected with just some visual and narrative changes, like having you see a giant cityscape past the water wall like you could see in the Argus skyline with Mac'aree, or having Azshara have deliberately let the Ankoans and gilblins last so they could guide the players to her palace and do the thing. Everything else is standard WoW villain fare that's just how the medium works.
Mind, with Jaina they showed a willingness to not even have you actually defeat a raid boss and I think that would've been much better used on Azshara. She also has more genuine anti-villain/anti-hero potential, in her grudgingly working with the players because she doesn't want Sylvanas/Death/The Void Lords to destroy the world she means to rule. That'd be a fun detour and I think she's the kind of character who has enough fan backing to make it possible. Of course, hopefully ending with the night elves actually getting to face her in full.
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Nymrohd
Your argument is a fundamentally hypocritical one because you steelman the Monster of the Week stories while only accepting the worst examples of the faction conflict. Yes, the Monster of the Week stories could end with losses much like how the faction war could have reasonable stakes and be a side thing - Wrath did this well, so did Cataclysm, Stormheim in Legion was a nice contained story and so on. Ditto, in small setups, the Monster of the Week stuff can work - I liked Zul and G'huun in this one, incidentally someone who actually accomplished things or the Arakkoa in WoD. But the larger baddies are even more limited than the faction war because they are predestined to fail and fail spectacularly after their opening round. The reality of the Big Bad expansion is that it's a whole lot of watching Alliance-coded characters go on Alliance-themed plots without internal conflict against a pushover of a Bad Guy, with the one exception in Cataclysm where it was Horde-coded instead, except for Rag. It lacks tension, it lacks investment for big parts of the playerbase and it's bound to fizzle out without impact. Say what you will about this carfire, but a fuck lot of people cared about it and that's because it actually materially affected them. The whole of Legion past the prepatch might as well not have happened and it would make no difference to BFA's story.
The faction conflict has consistently produced far more tangible impact on the world because it's permitted to have losses. More Horde characters died or left in BFA than were even present in Legion, ditto the Alliance has lost more to the Horde than to every other baddie combined. The whole bit about toxicity is nothing but a buzzword, so no point dwelling on that. If any messages in this mess is toxic then it's the one it actually pushed in its story instead of its marketing. That being the ideas that genocide should be waved off, that you should elevate abstractions over the wellbeing of those you're responsible for or that only people in power have agency and that everyone under them are lemmings who are either tricked or don't know what's good for them.