I tried to write this as comments under Shroom's post, but it was too long. So here it is as a post/review:
That I think the film pretty much sucks is beside the point -- the questions I have are practical, factual, and objective questions. (We could argue the aesthetic worth of it all day, and apparently disagree). First of all, I think it's clear that Adam and Dad could really see evil visions, that they really were doing God's work, and that the people they killed were all killers themselves. (There's no other explanation for Doyle asking Adam how he knew Doyle killed his mother: the only way Adam'd know is by getting his name from God on that list, then touching Doyle to confirm it). Shroom's explanation that maybe Adam is just a keen detective is thrown out the window when you consider that Paxton would have had to have been an equally good detective (to sniff out the pedophiles and what not), and that's clearly not what's going on.
I agree that the script is neither pro- nor anti-religion, because its waters are muddied by a hyopcrisy: on the pro side, God does exist and is correct when identifying murderers; on the negative side God's will turns men into killers, too, (and even the Old Testament has God saying murder is wrong) and they sometimes have to kill good people (like the Sheriff).
So now that I've said what I think the facts are (i.e., Adam and Dad really did have visions and were destroying "demons"), I do think there are holes here. One is, Adam comes to Doyle at the beginning and says "my brother is the killer." Dolye says, "how do you know?" And Adam tells the story up to the point that Paxton kills the first nurse lady. Then Adam says "see now why I think my brother's the killer?" And Doyle seems to buy this. Wouldn't Doyle say, "uh, actually, dude, it sounds like your Dad's the killer, not your brother."? Why does he buy the brother story at this point? Next, the film doesn't really make it clear that there has been a second series of murders -- for a while I was thinking that the God's Hand Killer that Adam is confessing about is his Dad, the one who killed the nurse and the pedophile, etc. But it's not. Fenton has gone on a killing spree, apparently, and that's the guy that Doyle is hunting. If this is the case, why are they called God's Hand murders? God's Hand murders would be done by Dad or Adam -- people to whom Angels visited. If Fenton was just a normal demon killing normal people, it wouldn't be a "God's Hand" killer. He wouldn't plant letters talking about "there will be no more bodies; I'm hiding them, etc." It would be Adam and Dad who were taking lives through God's Hand. Another small problem is that Paxton says the Angel told him he would deliver 3 weapons ("Magic weapons, dad?"). But he only delivers two: the lead pipe and the Otis axe (and who the fuck is Otis? and why doesn't that come into play at all?). I guess Angels can't count to three, or else were keeping a grenade or something for themselves.
Anyway, to answer the question "why didn't Paxton see that Fenton was evil when he touched him" is clear to me: because Fenton hadn't killed anyone yet, so there was nothing to see. The Angel told Dad Fenton was a demon, and the Angel was right. There was just no evil to see yet. Dad just didn't want to believe (there's that word again -- it's all about faith) that Fenton was evil, so he didn't have faith enough to kill him or see evil.
I don't know why I've just spent 20 minutes typing this out. This review should have gone into the aesthetic reasons why I thought the film sucked -- besides plot holes, there's the shoddy cinematography (by the guy who did Jaws, no less), the poor acting on the part of the kids (sorry, but Osment raised the bar), the dull, bland dialogue (should have been leavened with a sense of humor, but there's only one or two [intentional] laughs in it), and the utter predictability of the suspense (I saw Fenton axing Dad from a mile away, and I saw Doyle's complicity in "something" from the opening shot when he evily gets out of the car and goes into the station asking if McC asked for him by name. You just know something's up). Overall, I don't care that the film confirms the existence of God and demons and supports serial killings and that I'm an atheist and oppose serial killings. What I do care about is that it's a poorly written and cheaply structured shaggy dog story that needed to conceal Adam's lie (saying his name was Fenton) for no good reason in order to give us the "Usual Suspects" twist it needed to put butts in seats. Yawn.