I'm not sure if it's a quirk or a flaw, but when I read something like the story of the Magi I wonder what happened to them afterwards, or read something like the
one fighting against the prince of Persia, I wonder how that played out. You can get into trouble taking speculation seriously, but if it's just a "What kind of story can I tell" it seems harmless. These trend quite short: squibs and short stories. And sometimes I get an image or a problem, but it just sits there with no action or resolution, and I don't even get a squib.
Take the Daniel bit, which seems to imply a recalcitrant angel (demon?) in charge of an empire. Maybe a guardian angel of the Persian court? That idea just seems to sit there for me. Maybe the POV of the guardian angel's assistant would work as he tries to make them do right (or do wrong, if its a devil), with one of the humans starting off in a direction he or she should not go. Conflict ensues with the other humans and with the other empires' courts and their guardian angels. Call that Setting X. It could work, but it doesn't have the nice mythic feel you'd hope to find with these sorts of creatures. On the third hand, neither did Screwtape and that works brilliantly.
If you wanted to go with horror, you could notice that there's not a 1:1 map demon to human in demonic possession. The unnamed demoniac had a lot of unwanted guests. It might go the other way as well, and have 1 demon possessing or at least oppressing/influencing a nation's worth of people. Looking at some of the wicked madnesses that surrounded World War II, you might tie that in and call it the War of the Three Demons. The problem with that setting is that you can't tell a plausible story from the demon POV, and the humans are either captive or not. You could focus on unmotivated changes in individuals (as in the start of Ballroom of the Skies), and make the story be that of a friend trying to liberate a captive soul. But then you eventually need an exorcist of some kind, and the solution becomes too easy or too hard. It's also hard to have the friend "keep up" with the possessee. Maybe a group... Call it Setting Y, and with some effort it might turn novella.
Or you could take the bull by the ... whatever you please, just don't involve me ... and try to tell a story of a war between angels. Some big names have tried that (France, Blish, and so on) and some lesser lights (Peretti) without obvious success or plausibility. I don't think the mathematics rule "Try to solve a bigger problem" is going to work with Setting Z.
What would you try?