When in the timeline does the hookah cutscene take place, and who are they talking about? We're supposed to think at first that they're talking about the Nemesis, but since the Nemesis wasn't created until after the alchemists were killed, that can't be it. They might be talking about [[spoiler:Lucien, but telling him their secret wouldn't guarantee their survival, it would only have made him more determined to stop them, which makes that unlikely. Kaine is absent from the scene, so the three might be referring to him, before they decided to recruit him; what they say about "this nemesis" is very in-character for Kaine, but then there's Sophia, Kaine's lover and the one who suggested recruiting him, arguing against letting him in on their secrets. Apparently a novelization has the scene be referring to Lucien, when he was actively stalking the alchemists, but that still doesn't completely make sense.
At the ending of the game, Lucien and Alexandria both come back to life and run off together, framed as a happily-ever-after But Lucien was the Nemesis, who held the entire land in a thrall of insanity and terror, who imprisoned the alchemists' spirits in constant torture, who murdered Bivotar and implicitly other "meddling spies" before, who ransacked Sartorius' laboratory such that "blood flowed down the halls", who drove Ellron's army to commit "atrocities". Whatever his grievances, he was bad, bad news - worse than the alchemists ever were. What gives?
Whatever he did to The Alchemists, they pretty much had it coming, all things considered. The reason for the insanity and terror in the land was The Alchemists' ritual in the first place. It's what Alexandria's referring to in the game's intro monologue, about how "a single act can be so evil it can curse the world." A lot of Nemesis' writings are pretty melodramatic, so I doubt the "blood flowing down the halls" really happened, especially since the Asylum is pretty clean for being long abandoned by the time you get there. As for Ellron's army, it was made pretty obvious by the stuff you find in Irondune that Kaine was at war with him long before Nemesis existed. It's why Kaine was so pissed that Lucien was more interested in art than warfare.