True somewhat. But even without their Treasure Palace and Powerful Formations, individually few Xiuyaoists can match them. Remember, they are close to divine beasts. Di Long and Di Jian can match Kong Ming Xiuxianists not to mention Xiuyaoists of the same level (late Dongxu). And from what we've seen so far, there has been no mention of any other Xiuyaoists that are stronger than them (not that they don't exist) apart from Azure Dragon and 3 Eyed Toad. Even Yan Rui (Qin Yu's strongest Guardian) is at late Dongxu. And Azure Dragon and 3 Eyed Toad's strongest subordinates are late Dongxu as well. I believe Di Jian and Di Long are only a level weaker than Reverend Yan Xu and Yi Da and only because they are late Kong Ming stage.
As for your last point, it is very true. Which is why I mentioned they will only do this as a last resort, i.e. when they have nothing to lose. At the moment they still have each other and their status as a superpower. Once they no longer have that, there is no telling what they might do. And with their power, assassinating almost any individual will be a piece of cake.
But tape raised a very good point about the politics. I imagine it is the same with our modern world. They cannot risk all out war unless they are sure they will only benefit and not lose. Weighting up the benefits and costs of attacking any one of the superpowers will endanger them, not unless there was an open opportunity.
Also the Base Building pills in the story filled the issue I had with the population of Xiuzhenists in the world. If they are running low on manpower, I assume they go looking for talented people in the mortal population and feed them some of these pills to get them to peak Xiantian. I also assume this solves the problem with Xiuyaoists giving birth to other demonic beasts, feeding them these pills.
But the demonic beasts in the Wilderness dont have that advantage. They will have to cultivate everything. Hmm...I wonder if there is a teleportation device in the Wilderness that goes to the Teng Long continent. Otherwise, I would think the Wilderness will have a ton of Dujie, Dacheng and loose demons accumulated over the years. Because where else would they go? They can't unlike the Overseas Xiuzhen World go over to the Teng Long continent once they hit Kong Ming stage and/or the Chaotic Astral Ocean when they hit loose immortal stage.