I can try to address most of your issues or complaints about the narrative:
1. "Another thing is that the prince/princess is always being worshipped by everyone, yet the protag, who is supposed to have this ultra divine blood, is, from a narrative perspective, sort of put into the second-place category."
The imperial heir essentially is the leading figure in MC's generation. They have access to numerous priceless artifacts, fortune, martial arts and skills, as well as incredibly strong mentors, such as their grandfather, the current emperor and strongest martial artist in the world. Also, their aunt, the Sword Mistress, whom by Tang Ruo's account is the best sword wielder in the world. Tang Ruo is expected to become the next martial sovereign on reputation alone. Not to mention the 97% blood purity. Tang Ruo has a massive head start compared to MC, which is shown and explained when they first fight.
Meanwhile MC is the heir to a dying clan that's been having a talent drought for centuries, at least, which was only briefly broken by their father. It's even stated by the library that if nothing is done, then the Wu clan may just die off in the next hundred years. The only things going for the MC are the inherited clan martial skills and perfect blood purity. Compared to Tang Ruo, they're severely lacking in resources and experience. A mere difference of 3% blood purity isn't enough for the MC to overtake the prince/princess is a matter of months or even a few years. So, from a narrative perspective, it makes sense that Tang Ruo is going to be the more focused disciple in the martial world, for now at least.
That being said, the MC absolutely takes Ws and are a force to be reckoned with in their own right. As far as the point you are currently at, you can: beat Tang Ruo in the tournament, beat an early-Houtian for your first arena match, beat a bandit gang lead by another early-Houtian martial artist, and beat the son of the DQ who has the ability to transform, albeit partially, into Asura (most powerful transformation in the verse btw).
Also, the only things Tang Ruo has done since entering the sect was enter early-Houtian off screen, showcase their eyes of perfect replication, and then beat up Jing Guo's brother in the arena, who initially was 2 stages higher than them. It's impressive and it overshadows MC's feats by a considerable margin, but you have to remember that they have ridiculously powerful martial arts and in-born talents that the MC doesn't get due to their differences in family.
2. "Like, if Ruo is beating people in the Arena, we should be beating people in the Arena."
We do. In fact, as of current build, we have two arena fights. We haven't done an arena marathon like Tang Ruo did right before the expo, but we still get to showcase our abilities and prove ourselves to the masses.
3. Ruo copied two of our abilities with their magic eye hacks, then has not shown to use them again (on-screen at least). Besides, MC will eventually gain access to new abilities and resources that exponentially increases their power (some available in current build, in fact). Tigress gets a master before you, yes, but you eventually are recruited by an elder of the sect (again, available in current build). The protagonist is strong, it's just that the MC is constantly going up against top tiers and higher stage practitioners that you may feel otherwise.
4. "it's turned into a slog where the story doesn't make us feel like we're progressing at all - that we are always behind in a world where people are far more powerful than us, despite us apparently being born with enormous potential."
I mean, not really. MC and Tang Ruo are the top 2 of their generation, far above the likes of Ai, Tigress, and Jing Guo. MC is pretty much going against the top brass and trivializing everyone at or beneath their martial level. Literally, the only people that give the MC trouble are the ones who are at the top of peak-Houtian and above. Which makes sense, because there is absolutely no reason for MC to start clowning on people decades their senior or characters so high above their weight class.
As far as Tang Ruo goes, they do get humbled. It actually happens not that long after you left off in fact. They're still considerably stronger than you (at the point you left off), but MC quickly grows stronger, and you'll learn why.