The formulation of this phrase seems odd and I can't pick the full meaning out of it. He says it after Wormtongue has thrown the Palantir out of Orthanc, which seems to be a great example of evil shooting itself in it's own foot, but that doesn't seem to be the thrust of the phrase.
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That's exactly what it means.
The desires and plans of evil people ("evil will;" "will" in this case being the noun relating to intent and desire) often ("oft") ruin ("mar") the cause of evil.
That is, the phrase says that evil people are selfish, petty, and short-sighted, and that this quality in evil individuals often impairs the grander world-embracing schemes of capital-E-Evil. It's ironic, and the context of Wormtongue and the Palantir is a great example of that irony.