The important thing to remember is that gods and monsters are products not of biology but of mythology -- and, above all, that they are not human.
In fact, that they are not human is often the whole point. Fantasy and Science Fiction share that they invent The Other primarily to compare and contrast it with humanity. Quite often (and I'd like to say 'most of the time'), the author is not trying to say, "Humanity is like this.", but rather, "Humanity is NOT like this, and by contrasting humanity with things that it is not, we might gain a better grasp of that slippery question of what humanity is."
It's always hardest to see yourself. Without something to compare and contrast to, it's almost impossible to see yourself.
So fantasy might be interested in the question, "Do humans have free will?", and it might respond by trying to imagine a race that clearly does or doesn't have free will and then comparing and contrasting humanity with the invention to answer the question, "Is humanity like the race that clearly doesn't have free will, or is it different?"
Likewise, science fiction might be interested in the questions of how much we hold to be universal is actually just a product of our particular biology, and so imagination sentient beings with very different biology to see if they do or do not share some 'universal value'.
The point of these excercises is that the thing imagined is not human. If everything we imagine is limited to being human, we not only greatly limit our capacity to imagine, but we are also resting on the unquestioned belief in what you might call 'sapient essentialism', that underneath everything possible is the same and shares the same values. I'm not without empathy for why someone would denounce attempts to create 'The Other', as I am well aware that the creation of 'The Other' is related to much of humanities self-justification for being inhuman to one another, but conversely I think that demonizing every attempt to look at 'The Other' as being motivated by this immoral purpose is to be willfully blind and to rest your moral convictions on a very unstable surface.
As for whether the creation of 'The Other' rests on differences in 'Biology' vs. 'Spirituality', I don't think it matters that much except for the comparitively trivial question of which genera to slot the story into. If 'The Other' is a stand in for some real world ethnic group, I think we'd all agree that it doesn't matter much whether they are being demonized on the basis of supposedly inferior biology or inferior spirituality. I think that for these purposes we can use 'biology' and 'spirituality' somewhat interchangably as two different languages for describing essentially the same thing. It doesn't matter that much most of the time if Mind Flayers or Aliens or irredemably wicked as a result of their biology or if their biology makes them irredemably wicked (when it does matter its precisely because the author is trying to get at the question of whether there is something more than the material). For myself, I often bounce back and forth between describing humanity in terms of biological instincts and spiritual dispositions, and I don't think of myself as talking of two different things but of approaching the same subject from two different sides of the coin.