This series is beginning to get better and better with each episode. It's like you haven't ridden this particular bike in a long time, but I feel you've addressed a lot of opportunities posed in the first two episodes.
First of all, the animation. There's a marked improvement in the "talking avatars" to be seen. I'd caught a glimpse of what you were doing when you posted the snippet of FlameGirl on DA, but seeing it in practice is great. I've noticed that you've also seemed not to rely on those same avatars as heavily, at least during action scenes and places where a pair of talking pictures would poorly convey the situation.
The voice acting has been good since the first episode, and this is no different. The writing has shown a bit of improvement as well, and the fight scenes are a bit faster paced, which was something that definitely needed addressing in the first episode.
I think my only complaint at this point is the depth of characters, but this may be something that simply can't be addressed when you consider the structure of the series. TOME has a LOT of characters, and a LOT of plot to address in the time allotted, so perhaps the concept of giving DemonKing a little more depth may be, while preferred, a bit impractical.
All in all, I think you're taking the series in a good direction, and, as a long time fan of TTA, I think that you're doing a great job so far. Keep it up!