The Flame Demon may not necessarily be a "demon" but a malicious spirit with no love for mortal kind. It came from the World-Heart, brought to the mortal plane by the Red Scribes where it took possession of the warrior Vulcan. The "demon" needs a body to exist outside the World-Heart and is willing to trade Vulcan its power in exchange for more control/possession of the body.
Vulcan and the "demon" both wish to defeat the ice lords who obtained their power from the World-Heart. It is dismayed by how weak mortals are and their seemingly unwillingness to directly confront a problem; morals, duty, politics, and comradeship are obscure concepts to it.