So I have been checking old posts in the ci-en site for Sinisistar and discovered a couple of things:
1. This thing is called Seere, a higher being who is invisible to the human eye and receives its name after the name of the devil. Sounds familiar? It's apparently inspired by a similar monster that crushes you in Bloodborne.
2. According to Nennai, the portrait changes when Rabiane enters the fake church, showing she is already controlled by the Otherworlder. (I didnt pay attention to this before):
Her mating with the slug was not a planned move, she was compelled to do so. So the person who posed the theory of the Observer being too enamored with the shortsack and foiling himself, congratulations.
3. Quoting: When I say "nightmare," it might be more accurate to think of it as 'a world created by a higher being' rather than a dream that you sleep in and then wake up from.
If Labian loses, the nightmare becomes reality: the slug impregnates Labian and uses her as a mother for the higher beings to bring into the world.
When Rabiyan completely falls into the role of the mother, she loses the ability to escape from the world of higher beings and enters a reality in which she will continue to give birth to higher beings forever.
After the final boss battle, the higher being is defeated, but Ravian will not be freed until the new nightmare that is the additional stage after the new costume is over.