Pretty much any meaningful use of the term genocide involves very large amounts of murder. Most definitions you can wrangle up will literally mention terms like "killing" and "extermination." Otherwise you simply get into things like destroying culture or taking it over or whatever. We don't really have a good analog in the real world for what's happening here though.
Like I said, if you want to put a bunch of inherent value in humans being literally and exactly human then, maybe? But I think that's enough of a grey area for most people that in a game like this, it's fine.
The way I see it, if aliens showed up and started converting people to aliens too, I wouldn't really care if they asked everybody for permission first. Even if every single human agreed to be converted, I wouldn't call that an evil thing. Changing every human into a non-human isn't inherently evil in my view.
The only moral problem I have here is the consent aspect. But that remains an equal concern when applied to both an individual or everybody, in the sense that I'm not going to be chill with a murderer simply because they aren't a mass murderer.
As for having to explain why demons aren't evil... again I don't agree. Yeah they are playing with traditional mythos, but come on. This is hardly the first time anybody has done this. Their whole not-actually-cartoonishly-evil approach here is practically a trope at this point. I don't think any kind of super full detailed explanation is required here.
Just look up the UN definition, it definitely covers other situations than straight up murder. Even without diving too deep into theoreticals, would forced sterilization qualify in your understanding? It's not murder, but it's definitely genocide, at least in the long-term.
And in terms of conversion to other species and the like, I can guarantee you that the most realistic response to anything similar would be an immediate human supremacist movement. It's in human nature to be tribal, and the appearance of an entire other species, especially one able to wipe out humanity would trigger an incredibly brutal response.
Of course, I'm not demanding of the game to be this sophisticated, but at least make a token effort, or don't go there.
And for the why demons aren't evil part, well.... You saying them being more complex than cartoonishly evil is a trope is incredibly ironic in the face of the overarching plot of this game being them conquering the world. Literally, the trademark cartoon villain thing to do. If the story was framed as only them trying to find some refuge from the extermination of their kind, then it would be sympathetic, but would immediately destroy the part with converting others to demons.
Again, you can't try to convince me that the demons in this world are more than just evil, because a) I have no alternate knowledge within the story and b) we only see them act evil.
But what's more, the writer isn't just pulling out the concept of demons as a singular thing. You also have the accompanying concepts of angels, and them supporting other people in the world. So the writer is pulling on the same exact mythology the inherent component of which is demons being evil, instead of trying to make up his own using the general concept.