how did manfred pay for his father and forefathers sin?

In a tongue-in-cheek fashion, Walpole-as-Marshal points out that The Sins of the Father is main moral of the story. Indeed, this classic biblical and literary trope is central to Otranto. Don Ricardo fabricated his claim to the principality and set in motion the deleterious events that would lead to the killing of innocent people, designs of divorce and incest, violence, and disarray. Children are fated to bear out what their fathers do, which is a reminder to men and women to lead virtuous lives lest, their sins continue to echo down the generations.

More straightforwardly, though, Manfred's son was killed by supernatural means, and his daughter was killed by his own hand because of his obsession with keeping his rule over Otranto. He ended up losing everything in the end: his wife, his children, and his estate, and went to go live a sequestered religious life.