I think Manannan is my favorite -- followed by Lolotte for much the same reasons already indicated. You experience that evil, so as a player in the story it felt much realer and scarier.
Even now with the original (and, yes, in the remake as well) you can just imagine the terrible things that awful wizard put Gwydion through all the years before the game and he is a horrible presence in the game. Even in his defeat, he manages to terrify you -- "oh no, it didn't work!" and then he reappears and your heart just stops. Even now -- knowing what I know and having played it probably 100 times -- I freak. "He's gonna kill me. He's gonna KILL me!!!!!" It's that last moment that makes me love him best.
Also, I like him in KQ5 as well because he has that quality about him that I find described best in Quest for Glory V: "He will seek victory even in his defeat." He's a cat, but he's still gonna get you killed.
Lolotte is also one of my favorites because she is so blatant. She doesn't care. She's pure evil, pure greed, pure villainy and she knows everyone knows it and she LOVES it. And you come wandering into her realm -- which she has finally wrested control of by taking Genesta's talisman (and just try to tell me Genesta's description of that event doesn't give you a visual image that makes you gasp!). And you have no idea who she is. Oh. Pity.
So she makes DAMN sure you know. And once you know how incredibly, truly vile a creature she is... she forces you into her family. She's not doing that for Edgar, even if she plays it off that way. Yes, Edgar loves you and yes, that probably is what gave her the idea. But she can control you -- you the stupid, innocent-looking girl who've proved such an invaluable asset already.
For the rest of your life.
Yeah, she's definitely wicked.
Alhazred is great and all -- really, probably the cruelest and smartest baddie of the bunch. But so much of his evil in inflicted on others.... it doesn't have quite the same impact for me as the other two.
He does, however, also have that "seeking victory even in his defeat" attitude that I love. He knows he's done for -- but he still grabs a sword to fight you. He's determined to take you with him. A villain should always be desperate for success of some kind -- because a hero always is.
The Father is a fascinating, albeit non-canon villain. I love his plotline -- but I think you guys have already said most of everything that there is to be said about him.
The thing I think is missing is the Hero-Turned-Villain. I LOVE those kinds of bad guys. There's not one in the entire series. Sadddddd.