Those would be perfectly valid assumptions. For this event, think... Spanish flu. The healthier you are, the stronger your immune system will react to the flu, the more it will tear your body apart from the inside. This also goes for healing, the more you try to heal it, the worse it gets~ So the angels are probably going to... not have fun.

As for the NPCs, yes. The NPC population would basically be affected the same way characters are. Some get saddled with events, some do not, etc.