Does Satan say he is unhappy in hell because he is still ruled by God? In Book 1

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No, quite the contrary. Satan claims he is content in hell. Yes, he admits an initial despair, but then convinces the others to look for the positive aspects of their situation. He vows to find a sort of “happiness” by waging an eternal war with God and changing all good things to evil.

He says that even though hell is not pleasant like heaven, at least he is no longer under God's rule. His exact words are, "Better to reign in hell than serve in heaven." He encourages the fallen angels to construct a beautiful building (Pandemonium) in which to live and to make the best of what they now have. The fallen angels construct Pandemonium, but it is too small, so they have to shrink themselves to fit into it.

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