He's not really the villain as such. Most of the conflict in the movie came from society and how the different ponies viewed each other. He went off the deep end and caused problems but his role was comparatively minor really. It was actually nice to see the problem be one that wasn't just "villain is bad and causes problems" and for it to be one of societal problems instead. As for the imagery, it's really no big deal
RE: My Little Pony criticized in US for use of fascist imagery.