Kain and Raziel fought. Initially, Kain had the upper hand and he battled Raziel into a semblance of submission. When Raziel asked, Kain admitted that he had no idea where the Heart of Darkness was; he'd never looked for it. Kain tried again to make Raziel listen to him, and understand that he had the free will to choose his own actions, while everyone else, including Kain, was "shackled" to the Wheel of Fate. Raziel was not swayed, and he attacked Kain, restarting their battle. This time Raziel was victorious, but as he tried to deliver a finishing blow, Kain caught his arm. Using Kain's body as a conduit, Raziel's soul started to be drawn into the physical Reaver which Kain was still holding. Flickering and fading, Raziel rallied, plunging his claws into Kain's chest. He ripped the Heart of Darkness out, then used telekinesis to throw Kain through a portal. It seemed that wherever Kain ended up, he was undoubtedly dead.
That assumption was proved false a bit later. Raziel resurrected Janos, forged the wraith-blade in the Spirit Forge, witnessed the fall of the Pillars, and fought with the Hylden Lord when he possessed Janos. The Hylden Lord triumphed over Raziel and destroyed his physical form, stranding him back in the Spectral Realm with the Elder God. While Raziel was detained, Kain awoke in the Demon Realm, the "shadowy realm" to which the Hylden had been banished, so long ago. His nature as the Scion of Balance somehow let him survive even without the Heart of Darkness. Kain battled several demons, and then exited the dimension with relative ease. He felt compelled to return to the Vampire Citadel immediately, so he did. Fans have speculated that this compulsion was due to Raziel's recent activation of the Spirit Forge, which summoned "the spirit of every Balance Guardian to itself".
Entering the Spirit Forge, Kain grinned when he saw that Moebius was already there at the bottom, talking to the (invisible) Elder God. Kain floated down behind him, and when Moebius mentioned his death, Kain surprised him, saying the Time Streamer was a "bit premature" in believing he was gone for good. Moebius' Staff no longer worked on Kain, now the Heart of Darkness had been removed. Kain impaled Moebius on the Reaver. He wasn't bothered when Moebius insisted that he served "One who has power over life and death" - the Elder God who had already restored him to life once (when the fledgling vampire Kain had beheaded him a short time before), and could do so again.
Moebius died, and as a spirit, he humbly started to ask the Elder God to resurrect him. He didn't get to finish his sentence, as Raziel, standing unnoticed behind Moebius, thrust the wraith-blade through him. Moebius finally saw the Elder God for what it was - as his sight was 'purified' by the Spirit-imbued wraith-blade - before Raziel consumed him. Faced with an eternity trapped in the Spectral Realm, and now aware that Kain was alive with an important destiny to fulfil, Raziel made the choice required to arm the Scion of Balance for "his true endeavor". Kain was examining Moebius' staff when Raziel re-entered the Material Realm using Moebius' corpse as a host. Kain reacted instinctively, running 'Moebius' through with the Reaver.
Raziel manifested fully, and a horrified Kain realized his mistake. However, Raziel would not allow him to draw the sword back. Laying his hand on Kain's chest, the wraith-blade dispersed into Kain, healing his physical wounds (including the scar he had had since his assassination in Blood Omen), but crucially purifying him of the spiritual corruption he had had since birth. Kain was now able to reclaim his destiny, as he wanted to in Soul Reaver 2. In his final moments before being absorbed into the Reaver, Raziel reaffirmed his loyalty to Kain with the words "I - am not your enemy - not your destroyer - I am, as before, your right hand. Your sword."
Kain was now able to see the Elder God. When the Elder threatened him and sent forth tentacles, Kain severed them with the Reaver - now the Soul Reaver. After a short fight, he teleported himself to the top of the Spirit Forge. The Elder angrily promised that one day Kain's "wretched, stagnant soul" would belong to it. Kain retorted that until that day, the Elder had "best burrow deep", then left.
Defiance ended with Kain gazing at the ruined Pillars from the Vampire Citadel, reflecting that "the strings of the puppets had become visible, and the hands of the prime mover exposed". He finally had hope for the future - that had been Raziel's last gift to him.
It is unclear what the future will hold for Kain as the purified Guardian of Balance, and what his role as Scion of Balance actually entails. Mortanius was mistaken in thinking he was creating the Vampire champion, as Raziel was actually both champions in the murals: 'Redeemer and Destroyer'. Kain was neither, although Mortanius was correct in identifying him as the Scion. In Soul Reaver 2, Kain agreed with Raziel that the Pillars were crucial, and must be restored. He also said he wished to "return the Pillars to their rightful inheritors": the vampires. It appears this is what the Ancient Vampires expected of him when they foretold his coming. Presumably Kain would also want to destroy the Elder God, but as the Ancients worshipped the Elder, it seems unlikely they prophesised Kain doing it. They appeared to view the Scion too favourably for that. It is unknown whether or not Kain has now acquired free will himself - we cannot assume that he has. He might not need it anyway; Raziel's free-willed actions may have shifted Kain's destiny onto a path that eventually leads to his victory.