I agree, I like Iago as an ally more than as Jafar's sidekick. He didn't have much to do in the first film apart from being comedic. "Return of Jafar" did feel in-character for him to just say "screw it" to Jafar and go off on his own. Jafar was incapacitated and trapped in a lamp, why not just ditch him and figure things out for yourself? Then he wins Aladdin's gratitude and thus gets a taste of living with the 'good guys'.

You know what, I actually like him better as an ally. I won't call him a good guy because he's more in line with the character traits of an anti-hero. Other than despise being stuffed with salty crackers by the Sultan, he didn't really have his own motive for taking over Agrabah but was just as a loyal sidekick to Jafar. As an ally to Aladdin, his character becomes more complex. He's still selfish, greedy, and aggressive though it's played for comedy, but ever since
Return of Jafar
, he shows he has a softer side for compassion and friendship with Aladdin, Jasmine, and the Genie.
What we do in life, echoes in eternity.

Iago is evil I haven't watched Return of Jafar in a very long time

Great, I'm glad you agree with me that he was better as Jafar's henchman.

Evil. I think he worked best and was most memorable when he was playing off of Jafar. Most people probably still remember him as a villainous henchman, arguably Disney's best henchman to date.
"Lives with no meaning go straight past you, like trains that dont stop at your station."