> Some mythologists think that most demons are old gods
> that have been demonized by proponents of newer faiths
> or by a populace that now views the divinity as
> irrelevent or frightening.
Such things do happen. Cf the demonization of the Indic gods in
Zoroastrianism. The place of 'witches' in Western Christianity can
also be mentioned.
Pre-literate myth tends to encode some political information, where
one people defeat another, with the battle being fought allegorically
among the gods, with the winning side putting its twist on everything.
The power of autochthonous priest[ess]-craft is a neglected topic. If
you are an incoming military elite and want to dominate the local
peasants, you are going to have to come to terms with their religion
-- and with their home-grown religious leaders. For the most part, you
co-opt whatever you can, while pushing whatever modifications you can
get away with.