Can't say I agree with this analysis, Alphinaud's goal was to get into Eulmore to learn what he can about it, and see what aid they can offer regarding the sin eater threat. Both of his plans (his painting, and the Ondo trade deal) succesfully got someone into the city. And he had no way of knowing that the city was run by a sadist who likes to throw people off the balcony.
He establishes a good relationship with the Chais and Kai-Shirr, who end up being influential people in thier own right. His decision to confront Varuthy's cruelty and sadism directly is also a quick thinking political move - it's clear that this man won't be reasoned with, and he rules through fear and bullying; a powerful thing you can do in a situation like that is directly confront them. That's why the scene kept cutting back to the citizens of Eulmore as they watched, they had likely been afraid of Varuthy and his power for so long that seeing someone stand up to him and get away with it would be shocking.
So really, Alphinaud succesfully infiltrated the city, learned about the state of its leadership and the nature of the society, made inroads with the Chais, and stood up to a despot in front of his citizens and got away with it. I'd call that pretty successful.
As for the other stuff, Alphinaud tends to assume good faith of other people, and is often shocked or thrown when someone turns out to be acting in bad faith, or just trying to mislead him. Like with Asahi or Illbred. I'm just not sure that I would consider "has faith in people and thinks everyone else is acting in good faith" is necessarily a character flaw that needs to be overcome. You have other characters to provide the more cynical perspective about other people's intentions - like his sister.



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