Here's the entire villain arc, except for events only having to do with Hyperion, which can be found in the Everfree Arc.
(edited the changed-names Dec 2015)

This is a big arc, so I'll break it down into sections.

Ancient History:
Hyperion was killed in the Battle of Everfree, which left his horn shattered throughout the Everfree region that eventually became the forest. The tip of his horn was found by Ziph, the zebra alchemist who wrote the Black Book. Hyperion possessed him and the two of them were absorbed into the book several decades ago. The book has been in the possession of the zebra military since that point.

Celestia wrote her journal after her parents were killed. This journal reveals the truth about the power of the alicorns and what caused them to be killed. Celestia never revealed any of this to mortal ponies, but when Storm Shadow discovered the ancient ruins which contained the journal, he began to question the alicorn leadership of Equestria because his entire worldview was shaken. From his perspective, the sisters ought to have won the war through alicorn might ages ago. He feels betrayed.

Memory Orbs:
As a war veteran, Storm Shadow knew many who have suffered from psychological problems due to the war. He became interested in memory therapy as a treatment when he read Twilight's published paper on her memory therapy which she developed for Nyx several years prior. Storm Shadow came up with ideas on how to apply this to anyone using a physical memory recording and playback device.

He approached Twilight about this idea, and she hired him to be a part of her research team. This was prior to the Ministries, so it was Twilight's private research institute when he joined.

Royal Guard Ceremony:

The events relating to this incident are found in the thread on Razor's arc.

Nyx:
Storm Shadow was aware of Nyx's origins, but once he found Celestia's journal, it occurred to him that Nyx (as an alicorn) might have the potential to become a phenomenally powerful war pony. If only she wasn't surrounded by pacifists. This is even more confusing by the fact that Nyx appears to be barred from participating in the war. This makes no sense to Storm Shadow, as he is not aware of the nature of Nyx's actions at the Royal Guard ceremony. Storm Shadow wants to push Nyx toward the role of a powerful soldier, so after some failed attempts to get Twilight on his side, he decides to talk to Nyx privately over the course of a year or so, in the hopes to encourage her to pursue an active military role.

Littlehorn:
3 months before the Littlehorn massacre, Storm Shadow and his wife enroll their daughter Misty at the school. This should have represented a very happy moment in the family's lives, but as fate would have it, the entire school was killed and many, many families were devastated. Storm Shadow in particular lost his wife as well, as she was volunteering to help set up the school's first term. This left Storm Shadow a psychological mess as he was already suffering due to his experience in the war and his discovery of the journal. The loss of the entire school drove the last stake into Storm Shadow's conviction that the alicorn princesses had utterly failed their nation. In his growing insanity, he decides it is time to be rid of them and to take the nation to where it ought to be. To do this, he comes up with a plan to forcibly use Nyx's potential power since she isn't going to take on the task of winning the war of her own free will.

The plan

Storm Shadow realizes that an alicorn's horn can become exactly the weapon he needs. To get such a horn would require killing an alicorn. The only candidate would be Nyx, so Storm Shadow has to make her burn out. He comes up with the memory orb idea which would force Nyx to finish her transformation into a wild alicorn while also trying so hard to escape that she ends up burning out, thus killing her and providing the weapon for his use. The memories required for this trap would need to be so horrific that she would completely break down psychologically when she experiences them. Storm Shadow knows about the deeds of those infected by the zebra plague from 77 years ago. If he could get samples of these memories, he's sure he could make the proper trap for Nyx. In order to get the memories, he must unleash a new plague upon Equestria. Something which can be controlled, but would also provide what he needs.

To get the plague started, he needs a zebra accomplice with connections. He asks around Zebratown and finds someone who hates Nyx enough to motivate him to cooperate.

In order for this plan to work and not destroy the nation, Storm Shadow needs a reliable way to control its spread and also safely extract the memories. This was his biggest task after the plan was formed. What he settled on was genetically modified parasprites. The cute little flying monsters which could eat anything and quickly multiply to the point where they constitute a plague in themselves. Properly altered, they could serve as the tool he needs.

Stopping the plague involves several steps. The parasprites need to be bred into batches and kept in magical stasis in a box. This is achieved by a biotech firm specializing in magical genetic manipulation. Storm Shadow outsourced to the firm, and used money from the Nobles to pay for it. His assistant developed the mutation that would be used. Specifically, the parasprites were to be made small, like house flies. Their life spans would be shortened to a single day. And they would be engineered to seek out and eat only one specific thing - the plague bugs which are embedded in the infected ponies. The biotech company said that the modification wouldn't take because the samples provided needed to be alive if it was something living for the parasprites to seek out. This is why Storm Shadow said that the control mechanism was not yet finished, which upset Razor.

After Razor gave Storm Shadow the black book, Storm Shadow had his assistant study it to find anything else that they could use. She found a formula for paralyzing venom. They added this to the parasprite specifications, and placed their order for twenty modified parasprites.

Meanwhile, Storm Shadow perfects his memory orb extraction and is ready to retrieve memories.

Starfire:
Five weeks after receiving the Black book, Hyperion's consciousness within the book possesses Storm Shadow. He has found the host he has sought after for millennia. One who has a viable plan for world domination. Storm Shadow has now been completely taken over much like Ziph from some 80 years ago. Ziph is along for the ride as well, so there are now three consciousnesses within this body, but Hyperion is in control. Together, they are called Starfire. After this transformation, Starfire returns the black book to Razor with thanks and instructions to cause ponies some misery "while you still can". Starfire no longer needs Razor's help.

Starfire begins to make serious changes to Storm Shadow's plans. He doesn't just want Nyx's horn. He wants to become an alicorn again. And a fully powerful alicorn at that. He wants Nyx's horn attached to his body rather than being a wielded weapon. He wants to use Nyx's blood to bodily transform into an alicorn. He plans to take the strength of over a hundred mortal ponies and apply their strength to his own body to make it durable. And regarding the plague, he no longer cares if the plague is controlled. He will still collect the memories he needs, but he will allow the plague to spread after he's done.

Starfire will use Storm Shadow's accomplice who is a pegasus to take the captives they find at the plague nests. Part of the nest structure is to have captives for the purpose of reproduction and for food. Starfire and his pegasus accomplice take about 150 captives from several nests as they collect memories for Nyx's trap. Also, Starfire relocates his base of operations to an abandoned Stable cavern which was originally an excavation test, but no stable was constructed within. It is just an empty cavern with a front entrance and a few rooms off to the side.

Having Hyperion's full knowledge, Starfire understands wild alicorn transformation quite well. He knows what signs to look for in Nyx that she will be close to being ready for the trap. The memory orb will nudge her over that edge because she will be close to a moral "point of no return" as it is, and actively trying to resist her transformation. The memory orb will defeat that resistance, and she will finish her transformation, giving her horn full access to the Aether. Hyperion puts the finishing touches on his trap. He creates some Pink Cloud and rigs it to release into the entryway of the Stable when Nyx comes into the trap.

Starfire hears of Nyx's outburst when she challenges Celestia and Luna directly. He knows she is very close to being ready. She has just been sent off to battle as well, so it is the perfect time to spring his trap. Starfire abducts Lemondrop, the filly of Willow who works for the Ministry of Peace now. A note is left for Willow to bring Nyx if she wants to see her daughter alive. When the battle for Baltimare is won, the note is delivered, and Willow rushes to find Nyx. They all fly over to the trap and Nyx is captured while everyone else is trapped outside the Stable, unable to help.

With Nyx unconscious, Starfire takes her blood, which he uses to perform a transformation ritual changing him into a zebra alicorn. The zebra part is from Ziph, who was bodily absorbed into the black book many years ago. This creates a unique creature, being a zebra with a horn and wings. Starfire is extremely weak after the transformation, and he immediately seeks to grow in strength. He begins absorbing the strength of his captives, killing them one at a time in the process. He is growing in strength gradually, but it's going to take a long time before he's as strong as he desires, with all of the captives dead. Then, he will take Nyx's horn off her dead body and perform a spell to transfer it onto his own forehead, completing his transformation and finally returning to his former glory prior to his original death.

Unforseen complications:
Starfire did not anticipate that the heroes would be able to break into the Stable with the Pink Cloud and the giant StableTec door blocking their passage. But they succeeded together. They also brought reinforcements. Celestia has come, and she's ready to kick some ass. She tears into the dark, open cavern and takes out the few lights on its high ceiling, making it pitch black inside. Starfire is charging his body still, and Celestia interrupts the process by blinding him with sunlight. She gains the upperhand, and Starfire flees outside.

Nyx wakes up from her ordeal, not aware of what's going on. Rumble is with her and helps her gain her senses. Starfire has left through the main entrance where Luna is waiting there for him. She knocks him senseless, but he recovers. Celestia joins the fight, but Starfire is stronger than both of them. Soon, Nyx and Rumble also join the fight, and the odds are more even. Despite this, they are losing because Hyperion has knowledge of combat that goes far beyond any of their experience.

While this fight is going on, Flitter and Dinky are rescuing captives and relocating them to an abandoned building outside. Starfire spots this and evades Celestia and Luna's sight to go kill the escapees. He finds that there are no combat ponies inside, and is about to kill everyone when Nyx shows up with Rumble to challenge him. At this moment, Periapsis, who is connected through Nyx's armor, senses Hyperion and gives Nyx the power necessary to kill him. She uses the energy, but it triggers her SATS mechanism and sends everyone in the building forward in time 500 years.

At this moment, Starfire was hit by the blast, and it destroyed Hyperion's consciousness, leaving behind Storm Shadow and Ziph to inhabit Starfire the zebra alicorn. Starfire is extremely disoriented by this, and tries to get his bearings when they show up in the future. He flees the scene, not in any position to put up a continued fight. Thus ends, Hyperion's 5300 year long vendetta against ponykind.

4808796
Interesting thing about Nightwatch is that he's almost a proto-Goddess in one body, being of three minds with Hyperion being the dominant one. Though Hyperion doesn't gain anything from the other two they are merely the remnants of those that he's used.

Oh one thing, does Nightwatchs assistant suffer anything from her time studying the Black Book? She might make a useful minion for Nightwatch to carry out his plans, once the Black Book has zapped her head of course.

4809858
I'd say her family suffers the most.

She's not a pegasus, so she can't help Nightwatch gather captives. In fact, her own daughter is going to be one of those captives. I doubt there's much use she has as a minion.

4810673
That's true. I was thinking along the lines that the Black Book started to influence her in someway. But she dorsn't have it for very long and Hyperions already chosen his host.

One question, is Nightwatchs control mechanism used? And are all the infected nests destroyed by the end of the story? Just it might be a thread left unresolved.

4811319

Nightwatchs control mechanism used? And are all the infected nests destroyed by the end of the story?

It's used because it is intrinsically connected to the safe-harvesting side of things. In order to locate the nests and subdue the infected, he has to use the parasprites. And that sterilizes the nest, making them incapable of spreading.

However, he chooses to allow some nests to continue to spread, for funzies.

In the end, the ponies must come up with their own solution, which is tied to applying knowledge from a zebra to a megaspell, which detonates and causes everyone in Equestria to have the imprint of "infected" so that none of them can tell who new food/victim sources would be. Thus, they cannot spread anymore and become relatively easy for the military to mop up.

4811337
Thats cool, just checking really