In your view (or the view you are defending) is there any reason to be compassionate towards other beings ? If the answer is yes than that compassion should have extended to avoiding all manifestation so as to prevent their suffering.
If the answer is no, because they are just like characters in a novel, then there seems to be a very fundamental difference in morality between this view and most other spiritual teachings, which do teach compassion.
The idea that all manifestation should have been prevented to prevent suffering seems to take for granted, that the joys of life are not worth the suffering. I would disagree about that.
Yes, because that has always been my experience. I have never experienced a state of joy or happiness that seemed so good that I could see it as justifying suffering. I have however in the past experienced states of suffering so horrible that I would have given anything for them to end.
In this view the ego self existed before, but only in so far as I exist as the character in a novel, while I am reading it. So I would say yes, it is OK to torture a fictional character if it makes sense in the context of the story.