I don't really think he was the top ranking blade either, just speculating. But he was, probably the 'Grand Spymaster' of Morrowind, as he himself says. Unless he was lying.
And, just out of curiosity, can you tell me where the first text indicates that he has superordinates? I couldn't find it myself.
Also, just to make things clear to me, what do you mean with the 'devs misspeaking' part?
I feel so stupid today.
For the devs, I meant maybe they were thinking of Vvardenfell instead of all Morrowind -- it seems more likely to me that Caius Cosades was a spymaster for the island of Vvardenfell instead of the whole province.
When you read Cosades' letter to Olana (http://www.imperial-library.info/obscure_text/cosades_letter.shtml), he writes that he was a novice at the Kvatch temple a few years before the town was destroyed:
"Has Father Ilav shown any signs of recovery? He was ever so patient with me when first I came to Kvatch. I know I was not an obedient or diligent novice." I'm not sure how much to read between the lines. I don't think Cosades has become the humble monk that he presents himself as in the letter. But was he brought back from Vvardenfell in disgrace with the Blades and exiled to Kvatch, then Kragenmoor; or is he still an active agent who only uses the priesthood as a cover (which I suspect is more likely)? At any rate, we are shown that he was sent to Kvatch after his Vvardenfell assignment.