I highly suspect that Wolfe is working out some philosophical problems that Catholicism contends with.

The Problem of Free Will vs God's Plan: "How can one be simultaneously responsible for their actions and also be part of a grand design that is 100% planned out by God?"

In BotNS, the Increate allows free will, but then manipulates events through the Heiros/Yesod/Tzadkiel etc, via time travel (and whatever else they are capable of).

The mortals ARE making their own choices, and only the choices that lead to providence will survive the scrutiny of the time-manipulating Heiros. The end result would be a reality that is crafted out of the "correct" choices made by the mortals.
Thus allowing simultaneous existence of Free Will, and Divine Plan.

The Problem of Evil: "How/Why does God allow bad things to happen to good people"

The Increate allows bad thing to happen because the existence of those events aren't permanent. Eventually the only thing that will exist will be the best possible options.

We're reading a story about a person, Severian, who happens to be at a very pivotal position for providence to happen, or not happen.

Why Severian?

This is the secret of the guild and the Autarchs; Only those from the Seekers of Truth and Penitence are loyal to the point of carrying out the terrible orders that are sometimes required to move towards providence. And only certain individuals of the guild will also be able to NOT obey those terrible orders, when the time is right.

That's why the Guild sent Severian on a strange quest after he showed mercy, the Guild has a deal to help the Autarchy find candidates to be tested for the restoral of the Sun.

Or I might just be way off.