Waltz is a great episode, but Sisko's Dr. Loomis-esque proclamation that Dukat is evil was the beginning of the end for Dukat's character arc. A gross mistake and simplification of a once complex and fascinating character.
I've heard people defend this, but I just don't buy that being insane makes somebody more evil. If anything, it makes them less evil as their actions can be attributed to mental illness.
Dukat had a decent side, he showed it a ton of times. He also had a monstrous side. Telling us that late in the game that he was entirely a monster, was just a bare-faced lie.
I don't see how the show ever really did try to make everyone believe he was nothing but evil. I find it perfectly believable for Sisko to eventually have that opinion of him, but that doesn't mean that the audience must agree with him 100%...