Caster to level up

It really depends on what you want.

Medea is really more of a buff removal tool than anything else, useful for some hard content (ex: Hassan fight during this event).

Nitocris is a farming machine as she can NP 2 turns in a row with instant death chance, dependent on your first skill.

Medea Lily is a healbot support that just heals a lot, probably the most in the game. She's also useful for removing team debuffs (ex: Herc fight this event).

Probably don't level up Ilya if you already have Sanzang.

You should to level up Nito for farmming, Illya is ok if you want easier boss fight and Medea is preety useless because you just need to use her np to remove the boss's buff and then die 🐧

You're right that Sanzang makes Illya obsolete / redundant, so it's probably not worth investing in her unless you really care about her character. I'd encourage you to invest somewhat in Medea and then invest more in Medea Lily. You only need to get Medea up to level 60, her first skill to level four, and then complete her strengthening quest to get her third skill. Her niche can be quite different from Sanzang's - Medea's ability to debuff an enemy with her NP, plus her ability to NP on demand once her Rapid Divine Words is at level 4, plus the debuff cleanse/NP gain up for her third skill are really useful, especially when combined with the Chaldea Combat Suit's Order Change skill.

Medea Lily is a healer. That's all that she brings to the team, but she's the best at it. She will be very valuable in Arts stall teams or for any attrition-based challenges where you are forced to take a lot of damage over time, like the Parade of Hassans event. However, she doesn't have the hard survivability that you need to survive enemy NPs, so she's really effective when you have another unit that can help you tank NPs (e.g., Jeanne, David, Merlin against AoE NPs, D'Eon/Mash for ST NPs).

Nitocris is amazing for farming and Medea Lily is one of the very very few healers in the game and she's great for harder content. All of the casters you listed can be great in certain situations but Medea regular is probably the one you need the least given sanzang is essentially just a better version of her.