Nope, looks like you did it right. I'd say if you still had that many cards in the blessing deck and the villain is the only card still in play, you deserve a good rest. Lem with a Cure spell can do a similar self-healing tactic since he can swap it out for another spell at the start of each turn. If the Apothecary location was in play, the same tactic could have been used by any character. Sometimes bulldozing through locations can pay off, especially if you can mitigate the consequences. And sometimes you get lucky with Henchmen/Villains being close to the top of the location decks. If this is happening too often, you might want to adopt a "Henchmen/Villains on the bottom or near the bottom of the location decks" set-up like what was discussed in This Thread.
No, you do not have to and you cannot immediately encounter the villain, even if you want to. If you want to encounter the villain right after you "closed" the location on the same turn, you would have to use an effect to give you an additional exploration.
And yes, if you fail the first check, you still have to attempt the second even though the monster will be undefeated no matter how well you might do on the second check. So if you failed the first check and only took one or two damage, you may also take more damage from failing the second check.
In fact, if you defeat a henchmen and then close the location, using the henchman's power to make that check, you actually do NOT immediately encounter any villain(s) which were present. You would banish all other cards of the location deck, leaving a location deck of just the villain. However, after that's occurred, you must use another explore to encounter the villain (or a power that lets you scout and encounter). As such, it's quite common that you'd have to wait til your next turn to encounter the villain.
Aside from that, you're perfectly free to burn blessings at will, using your powers as you see fit without exploring. So, spending all your turns healing is something you can do if you so choose, so long as you have a card with the divine trait to do it. If you have plenty of blessing left, your strategy would be a good one, especially in solo play.
As for your feeling that Kyra is massively over-powered, I suggest you try playing the game with more than one character. First of all, its not especially likely that you'll be able to solo the scenarios from later chapters, and more than that, there is a balance to the game that makes it harder as more characters are added (harder in the sense that you have less time to complete the objectives). In a 1 character game, there are 30 blessings and 30 cards in the location deck... so it's not at all a rushed pace. In a 6 character game, there are 30 blessings and 80 cards in location decks. If you sit and burn blessings with Kyra's healing power in a 6 character game, you'd most likely lose impressively.
