It really does depend on the situation
In your situation, where villain become super villain, it honestly depends on how convincing the thing seems. If it just seems to come out of nowhere then I'll be pissed, in so much as it seems like a cheap shot. If it is however one of those things where it doesn't kill you outright, but it's clear that you aren't going to win, then I'd be more approving of that. If dread is the emotion you want to illicit at the end of a game, then I say that's a fine way to do it (in fact I have my own idea like that kicking around) Bonus points if you manage to give a sense throughout the game that the final boss will have that sense of dread about them.
Now, as for dystopian endings go, there are a few that have various results. An ending where it turns out bad for everyone and it's clear it was your fault I can find good if there is that hindsight where it's clear everything up to that point has fucked everything up, and you've just been complacent throughout it all (Nier is a good example of this) An ending however where it is dystopian in reality but the developers intend for it be seen as a utopia I generally don't agree with, but that's more personal opinion than anything else (DmC is an example of this) An ending where a dystopia is inevitable is all relative to the actions of the player/protagonist: that is, if the player/protagonist does everything in their power to stop it but can't (like your situation) then that I'm fine with, but if it's a matter of the player/protagonist existing somewhere outside of all of this, then I have to question the importance of following that protagonist being followed in the first place. I don't mean something where the backdrop is that of an eventual dystopia and the protagonist deals with it only tangentially as a background, but rather a situation where the protagonist has events outside of the relation to this backdrop, and where the dystopia just comes out of nowhere. It can work if you got me invested enough in the protagonist, but it's sort of like with Dear John: it was something that was completely unnecessary and was meant to target an emotional heart string without actually doing any work.