Selling his soul to Babidi would be character regression if that were the case, which it wasn't. If anything, Vegeta showing he couldn't really commit to throwing away his feelings for his family does an excellent job portraying his character growth, as does his mindset when fighting Goku being the reverse of what it was in their Saiyan Arc battle. Pointing out him killing the Budokai spectators isn't really a counter to this, considering he makes it apparent on the plane he'd have no problem with killing bystanders if they annoyed him and shows his compassion only extends to his circle of friends until the battle with Pure Boo where he feels regret for his actions. Him letting himself be controlled to fight Goku also makes sense when considering Goku's selfless actions at the end of the Cell Game were a major catalyst in his change at the end of the arc with it being apparent that he'd never be able to settle the score and his one chance to rectify this had been seemingly squandered.
If anything, the Boo Arc was Vegeta's character at its best.