From what I read, he was a bit of both.
He started out a hedonist and a lover of life. Why not? His older brother was destined to inherit, while he would be nothing more than a rich man who would never have to work a day in his life. Then his father makes himself Imperator, which suddenly thrusts the young drunkard into the IMperial Family, where he might actually have to do something.
He was a clever man, and learned much of governing under his father and brother's reigns. It is alluded to, or suggested, that he had something to do with the death of Titus, but that is not proven. He did benefit greatly from the demise of his brother.
His reign began well, then began to deteriorate. It was at this point the histories begin to turn against him, as he began turning on the Senate. Literate people write the hsitories, as you know, and the Senators were literate. basically, Domitian wanted his will put through, and the Senate opposed him. So he ran roughshod over them and got his will anyway.
It is also suggested that his absolute power made him paranoid and nuts, like Tiberius, and then Claudius. In fact, most emperors who reigned long ended up disparaged by contemporary historians- Augustus and Trajan being notable exceptions. There are some theories that Titus- beloved of all Rome- was so beloved because he had not served long enough to turn bad like his brother did.
Domitian did do some nasty shit in his later days. He did some nasty shit in his younger days too, but his middle days were actually quite good.
Hero or villain? He was both.