I like the settings and atmosphere you've put Wraith in so far. I've seen plenty of videogame/GN/OC characters labeled as "demon hunters," but nothing leads me to believe that most actually live in a world on the edge of despair. That or they haven't really dealt with anything special, just your plain old werewolves, vampires, and zombies.
I also prefer the idea of physically-existent demons. Eventually I'll get around to doing concepts for those.
That has occurred to me as well, why are Vampire, Ghouls, Werewolfs, Witches etc. associated with demons to such a degree.. Demons in my conception are associated with darkness, evil, Nightmarish appearance and powerful abilities.. unless one think of spiritual demons possessing physical organisms. But then i feel they loose their personality when they act trough an avatar rather thn showing their true self.