Are we supposed to feel sorry for her? Or at least, see her actions as wrong but understand her?

I think its the latter. And I believe the film does want us to feel this way too.

Because, even though, SPOILERS, her character is guilty of torture, murder and a few other criminal acts of violent wrong doing, she had a disturbing history of child abuse and based off on that, we can at least understand her and politely accept that yes its wrong and whatnot but without considering her an outright evil "female villain".

And its interesting that director Miike both took and understands that approach.

And yes as to the original matter and the gritty reality of life, overall, dear God, what a sad world we live in, whether Japan or ANYWHERE on Earth, as human beings.