You’re reading it right! The real drama for PCs is falling off the scale. This is the only real way to “die” and become unable to move on.
“Demon children don’t stay demon children forever. If you move off the Scale, your soul is claimed. This is the end of your character”
If this isn’t happening in your games I recommend implementing the optional Volatile rules to make things more swingy.
So what about combat? Fiends and breakable objects have health, and PCs do damage.
PCs DONT have health. They can’t die from getting hurt. Combat is a moment to show off and jam out and make lots of rolls (which can be dangerous).
Damage reduces your current Mosh, but that’s how you know you’re having fun.
Fiends can do damage to the breakable objects but all it does to PCs is take away their Mosh, limiting their next options.
Don’t forget rule 0!
The most important rule is that this game is yours. Don't be afraid to bend, break, dismantle, or tweak the rules. They exist to serve you, not the other way around. You should ignore them whenever it makes your game better.