Here's my take:
Ren was supposed to be acting as the emotionless Cain Heel, but he smiled, why? Because Murasame had taken an interest in Kyoko, and Ren's love/jealousy/protectiveness of Kyoko acted as a catalyst to start breaking down the Ren/Kuon barrier... actually, maybe it would be more accurate to say "merge"... time will tell.
As for where it's going, this is definitely the lead up to the climax, not right away though, there are still pieces that are not in place. I really respect Nakamura-sensei in that respect; her stories are well thought-out and executed, the outcome feels natural, even satisfying, because she takes the time to set it up. It feels slow, but it'll be worth it, I'm sure of it. Besides, if she went faster, the series would end sooner, and that would suck. ;)