The main plot pf the second one, Return Of Jafar seems to be how Iago becomes a good guy. As a kid I liked him becoming a good guy, but as an adult I feel like they ruined his character from the first film. He works better with Jafar than Aladdin. So, now looking back it seems a little out of character that he'd become a good guy, I wish he stayed evil as Jafar's sidekick, but oh well.
Evil. I think he worked best and was most memorable when he was playing off of Jafar. Most people probably still remember him as a villainous henchman, arguably Disney's best henchman to date.
"Lives with no meaning go straight past you, like trains that don’t stop at your station."
You know what, I actually like him better as an ally. I won't call him a good guy because he's more in line with the character traits of an anti-hero. Other than despise being stuffed with salty crackers by the Sultan, he didn't really have his own motive for taking over Agrabah but was just as a loyal sidekick to Jafar. As an ally to Aladdin, his character becomes more complex. He's still selfish, greedy, and aggressive though it's played for comedy, but ever since Return of Jafar, he shows he has a softer side for compassion and friendship with Aladdin, Jasmine, and the Genie.
I agree, I like Iago as an ally more than as Jafar's sidekick. He didn't have much to do in the first film apart from being comedic. "Return of Jafar" did feel in-character for him to just say "screw it" to Jafar and go off on his own. Jafar was incapacitated and trapped in a lamp, why not just ditch him and figure things out for yourself? Then he wins Aladdin's gratitude and thus gets a taste of living with the 'good guys'.
I agree with both of you. Iago became more complex as Aladdin's ally, although I'm not sure if I would quite call him "good". He still mostly cared about himself.
I actually played Iago (and Jafar) in a role-play a few years ago... It was fun. Iago wished to gain the ability to shift to human at will and have an infinite supply of wealth. XD
In reality Iago was never truly a good character. Just because he became a member of Aladdin's squad, he was still ruthless, sardonic, egotistical and just plain mean. So Iago never truly changed.