With the fourth season about to get here and my chance to be possibly wrong about to disappear, I want to take a moment to argue that Hector actually makes perfectly good decisions. I find Hector an interesting character because you can usually see an obvious link between a character's actions and their fate, but I would argue Hector's pretty much just a pawn of circumstance and this despite the fact he's smarter than everyone gives him credit for.
1) Hector agrees to help Dracula.
Hector: Is this genocide, Dracula?
Dracula: Would that concern you?
Hector: My fellow humans have never treated me with love, and I punished them for it. But I wouldn't have them suffer. And like any animal, I think the world would be poorer with their extinction. I would just see to it that they couldn't harm anyone else.
Dracula: Then that is how it shall be.
Now, let's put aside whether Hector had any ulterior motives yet. Let's just consider what his options here were. What was the ideal response here?
If Dracula shows up on your doorstep demanding an army to kill humans and you say no, there is a really good chance he kills you for it. Even if he leaves you alive at the moment, there's a good chance you'll be collateral damage later, either to the indiscriminate demon army he's going to get one way or another or the human mob that's decided to blame you for the demon army killing them.
Asking after exactly what Dracula wants is probably the best response. Hector doesn't directly say what, if any, actual lines he has he doesn't want to cross, but says something to establish if this is a conversation or a join me or die immediately situation. Only when Dracula responds reasonably does he elaborate that he'd rather not personally participate in torturing the entire human race to death, and it's still a really soft response pitched like he's trying to convince Dracula that's an acceptable option than that it's a demand he has before he'll help.
In S3, Hector will tell Lenore that he figured helping Dracula meant he'd be spared the fate of the rest of the humans, so it doesn't seem like he really thought what was going to happen to them was all that pleasant, and that matches up with him comparing them to cats and dismissing the suffering of their prey as okay. In his introduction in S2, we get him thinking back to that time he burned his parents alive. Hector isn't sadistic, but he's absolutely willing to condemn people to a horrible death if that benefits him, and he's even less fussed about other people committing atrocities that don't threaten him.
Should Hector have realized Dracula was lying? There's no particular clue about it here and it only seems obvious because we've seen how it's been actually happening for all of S1 by that point. It also wouldn't change the fact that saying no to Dracula is a horrible idea.
Which leads into...
2) But how much of an idiot do you have to be to miss that Dracula's genocidal and vampires are sadistic?
Now, Dracula keeps saying Hector's an idiot who doesn't realize what's going on, but Dracula does not exactly do a good job himself of realizing anything of what's going on. Dracula assumes if Hector knew what was going on, he'd object, so as long as Hector keeps working for him, he must be in the dark about this.
In the first episode of S2, Dracula talks about scouring all humans from Wallachia to his generals. Killing everyone will come up again and again. When he invites Hector and Isaac for a private conversation, that continues, as well as:
It's going to be all right. We're going to kill them all for you. They will suffer.
This is followed in the second episode by the forgemasters arguing with the other vampires about how stupidly they want to run the war, containing the gem: All I'm saying is that our goals can be met without gleefully paddling in the blood of children.
