Hi Turtle! I really like your Ninjago fanfic. It's probably the best Reader Insert fanfic I've ever read. But since you're rewriting, I have an idea on how (I think) (Y/n) could be better at revealing his true potential.
It seems to me that the main obstacle to (Y/n) revealing his potential is the fear that other ninjas won't accept him because of his past (at least that's how I understand his character). So, in order to reveal his potential, Y/n needs to tell other ninjas about his past. They would come to the village, have the same conflict with Xavier, after which (Y/n) would run away to the cemetery and after talking to Michael's spirit, he would go to the other ninjas and tell them about his past from his point of view (including his laughter as a defense mechanism) and only after that his potential would be revealed. And then, he would save the village from the tornado.
The conflict between Kai and (Y/n) could be based on Kai blaming (Y/n) for Zane's death. You could rewrite the battle as if all the ninja except (Y/n) were trapped while Zane sacrificed himself. And Kai would blame (Y/n) for not doing anything to save him, and in his emotions, call him a monster. And it would hit him much harder, as if history from his past was repeating itself, as if he couldn't save his close friend again.
You don't have to do all of this, these are all just random ideas that I really wanted to share. (English is not my native language, I am writing all of this through a translator). Anyway, I look forward to your updates. Have a nice day!