They can explain/retcon his SFIII appearance in any number of ways tbh, from saying that he temporarily shifted back to human or something to just straight up ignoring his look in that game. Either way though I do think we're headed for at least some slight retconning to SFIII's story, since people like Ibuki have now been retroactively made older than they were probably intended to be originally.
But with Akuma, the fact that they changed his appearance, plus the fact that they made him play more like Oni, and that he seems to be gradually becoming more violent/bloodthirsty (evidenced by his killing of Gen and the way other characters talk about him in their win quotes) does give me the impression that Capcom intend to turn him into Oni for sure at some point. Like for instance, if SFVI takes place after III, I wouldn't be surprised if he was just Oni in that game.