The answer to this question, in my mind, has to do with the style and form of this story. Let us note the way in which this story can be considered a parable. It is clearly allegorical in nature, so the action and the characters have both literal meaning and symbolic meaning. The inclusion of the devil thus seems to fit this parabolic nature of the story, and clearly points towards a moral lesson that can be drawn from this tale. The devil can clearly said to be man's greed and evil, and the notion of the devil fighting for Pahom's soul is an archetypal element that constitutes the plot of many parables:
"All right," thought the Devil. "We willl have a tussle. I'll give you land enough' and by means of that land I will get yo into my power."
The inclusion of the devil in this story therefore reinforces its form as an allegorical parable that establishes a clear moral lesson. The use of this stock character therefore draws our attention to its purpose and what Tolstoy was trying to convey in writing this story.
The Devil's inclusion in the chapter, "How Much Land Does A Man Need?" is central to the theme.
In fact, the Devil is greed itself. The author wishes to highlight the fact that man's need is insatiable and the more he gets the more he wants. The protagonist, Pakhom, has been tilling his land but he wants more. While listening to the conversation of his wife and her sister, he comments that if he could get more land, not even the devil could take it away from him. Thus, off-hand, he challenged the devil sitting behind the fire place.
The devil creates such circumstances in front of Pakhom that he gets more and more opportunities to buy land, but his lust for more land does not end. The devil tempts him as the Barina, the merchant from beyond the Volga, the visitor who comes from the Bashkir land and all encourage Pakhom to add to his wealth. Pakhom does not know when to put an end to his greed and finally meets his doom.
The message is loud and clear. A man actually needs as much land as is required to be buried in his grave.