Yes the entirety of Crawling Chaos is meant to be Nyarly only. As for the upkeep draw in final combat I actually had overlooked the fact that you might have two pools to draw from, I'll say from the herald because as written any masks drawn from the cup would eventually get filtered to the herald when defeated increasing that pool and diminishing the masks in the cup.
Penalizing clues is a good idea as it plays specifically to nyarlys attack. Though if it were all clues then only a single loss to a mask in final combat devours all the investigators.