Humble, kind monk does good, and in so doing, he inspires others to do good too. That's pretty much Wong Lai-Tsao's function in the book. He's the model for perfect kindness and humility: the true ego-less character.
Take, for instance, his daily job. He goes out and gathers fruit in order to share it with vagrants (7.10-7.11); he tends to those same vagrants' wounds even when the vagrants abuse his generosity (7.12-7.13). He does this everyday, every year, for no money or acclaim.
Why? Because, as he tells one emissary of Tze-Yo-Tzuh's (disguised as a vagrant), "'I am no more worthy of love than you, yet Tze-Yo-Tzuh loves me deeply and faithfully, providing for my daily needs. How can I not respond in kind?'" (7.16).
What can you say to that? Nothing, right? Which is why the vagrant replies, "'Good answer'" (7.18). It is a good answer. It's an answer that's all about the generosity and capacity of love.
It's also about incredible patience. Wong Lao-Tsai knows how to wait calmly, even in the face of death, for Monkey to claim his destiny of serving both Wong Lao-Tsai and, thus, Tze-Yo-Tzuh.
How does he do it? He submits to his own fate, something he's willing to leave in the hands of Tze-Yo-Tzuh (i.e. a greater power): "'If it is the will of Tze-Yo-Tzuh for me to die for your stubbornness, then I accept'" (7.56). And then he proves it, by letting a demon stab him and roast him over a pit (7.61-7.62). Talk about patience and commitment, right? Even Monkey isn't so selfish and stubborn to refuse that kind of sacrifice in his (and Tze-Yo-Tzuh's) name.
So think of Wong Lao-Tsai as Monkey's opposite, the perfect antidote to Monkey's overbearing arrogance and controlling ways, and thus the perfect catalyst for Monkey's transformation into his monk-ey self.