It doesn't matter if they can't actually do anything because the Pope is a Machiavellian genius, subtlety pulling all the strings. These are just means to telling an interesting story. The problem here is that the way you've implemented it has lead to a boring story. There are a ton of good stories where the hero is countered at every turn, desperately trying to get even a Pyrrhic victory out of every engagement. This isn't one of those; instead you have a passive protagonist who just kind of goes with the flow.If one character is an 'Agency' Eater though, is it really the author? Like, you could argue the Pope's the one eating the characters' agency because he's been planning it since the start, using correct means of dealing with his troubles. This in turn leads to the 'protagonists' to find themselves without agency, but that's pretty much what would happen if Emperor Palpatine ordered Luke Skywalker to kill a hundred children. He would ensure Luke would have no 'Agency' to do something else. What you are viewing as 'No Agency on the Characters' is merely the Pope ensuring they cannot act against his own plans.
Well, Louise went from Germanian 'Luise' to Noble Louise but didn't lose her down-to-earth attributes, and even her flaunted 'tsundere' attitudes are smoothed out to the extreme.
Saito went from cardboard character to having, at the very least, a bit more of a choice and his character arc starts right now, where it's meant to start because yes, this is 'his' moment to shine through. The moment where the view between Julio's 'Kill those that must be killed' and Saito's 'We won't kill anyone!' comes into conflict.
Saito's 'inner conflict' is a matter of modern view versus ancient view. Louise's coming into her powers far more strongly and far better off than Saito was because she had no qualms using them in an aggressive manner. Saito does. Saito is an average willed, 'does not easily get shocked' modern student. He is the personification of the Japanese student and the blandest possible thing that could be made out of cardboard. But we are working on it.
He has, in fact, developed a White Knight mentality. What you see as 'refusal to make a choice' is instead His Choice. He refuses to take a human life, no matter how horrible or counter-productive it might be. The more he was pushed into the act, the less he wanted to do it.
Saito is a White Knight.
Don't try and justify out of story direction such as drama, action, and interest with in story facts. The in story facts has to create the out of story emotions