You hit the nail pretty much on the head. There was a lot of inter-clan plotlines stressed in the original material. The problem with fighting against the shadowlands was multifold, too.
First, most of it wasn't statted and given hard rules; a lot of stuff was done this way to give GMs leeway. Second, the shadowlands oni were supposed to be fearsome, corrupting things capable of wiping out whole legions of troops singlehandedly. Unfortunately, most of the shadowlands beasties are about even matches for single low-ranking samurai with decent combat statistics. Third, the shadowlands were made to seem like an unconquerable foe. The PCs could kill a bunch of oni, goblins, and ogres, sure. But no matter how many goblins they killed, there would still be more; there was no way to really get anything substantial done, and that made fighting the shadowlands notoriously unrewarding.
I agree that the clan infighting wasn't a good way to make an RPG. When the party is guaranteed to have characters who automatically are at odds with each other, it makes plausibility get a little stretched. When you throw into the mix that each character is only doing his current mission at the request of his lord, it becomes even more implausible to keep the party together on multiple sessions. Enough ranting...
If you don't want to use final rest, see if you can find information on an nemuranai (read: artifact) called the Jade Goblet. It removes taint from someone who drinks from it, but it only works a few times. It makes a nice side quest or plot hook.
-nameless