I hope Hank recovers enough to put Hanzee down. If not, Lou will do. But the way he orchestrated the annihilation of the Gerhardts was masterful.
The "Massacre" shootout had a lot of pieces and was very well done. And a surprising score for Detective Schmidt, until his prisoners knocked him out. I liked that they showed Lou reloading his .357; I am an inveterate shot-counter.
I don't know what to make of the flying saucer thing. The episode was framed as coming from a book, so the audience is supposed to be conscious that it's not really objective. Just as the show is a fictional "true story," the "history" might also be fictional. How it ties in to the arcane writing the sheriff has been working on will be interesting to see. But the "aliens" do seem to be against the bad guys.
As for Malvo in S1, he only helped Lester because he was some kind of strife-causing force that had to sow mayhem everywhere. And Lester was himself a murderous sociopath, so helping him was assuredly not a good thing. Both seasons are great, I don't have a favorite.