No one could have expected that Caernak would meet his end the way he did, and it was one of the more chilling endings I've seen. Let's start from the beginning.
You went back into the Devil's Playground with Groloday the Pavic axeman and Keki Drim (or is it Kekidrim? No one can tell) the Flintnail Rubble Tracker dwarf, sent by Bendrath. You fought off an ambush by 5 krarshtkids in the first maze, then met 7 more plus the 2 kk-broo with a shambling chaotic hulk. These foes you also bested with few losses except for some armor and Dorgon's left hand from acid tongues. You entered the Krarsht shrine and easily destroyed it, then cleared the pratzim-gummed passage that you had avoided before. It led to a spiral staircase leading 50m down to a swift stream. The stairs were shaped like teeth, and were a tricky climb (Pachala slipped and almost fell to his death). Eight winged chaos creatures blocked your climb, but were scared off easily.
Caernak bravely swam downriver to explore around a bend, and that was the last you saw of him. Seconds later, something snapped his anchoring rope! Arcus + Tison headed in pursuit, only to find bits of his equipment and some blood on a ledge overlooking the river. They explored a tunnel past the ledge, following huge muddy footprints, blood spatters, and guttural voices in Darktongue. The inhabitants of the tunnels came snuffling after Tison, who blasted the 4-armed scaly giant (SIZ 60!) in the face with the blast wand. It was enraged and chased him, only to be felled by Arcus's mighty spear. Its dying cries brought more of its kind from tunnels beyond and the two explorers wisely fled, with at least three other giant things in pursuit. The party had no choice but to abandon the Devil's Playground and assume that Caernak had met his end in the clutches of these monstrosities. You raced out of the Krarshti area into the night and made it to Yelmalio Hill before Taleo's Sunbright expired, then the next morning to Pavis.
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Taleo remains convinced that his quest, the Eye of Wakboth, lies deeper in that terrible place. He exhorts you to gather stronger forces and delve deeper in the future; the eye MUST be hiding there in The Black, mocking your meddlings. Bendrath tends to agree with Taleo's convictions but is realistic that current resources may not permit a return to those tunnels soon.
Che'enshashan is stunned and crestfallen when he is brought word of Caernak's loss. "Hope is lost... we have lost too many in past years... I can only pray to Zola Fel that my ending will be more merciful." He retires to his quarters on the Temple Barge and will not speak with anyone for days. When he is finally speaking again, he admits that he consulted with Zola Fel and asked "Has the soul of Caernak the River Voice come to the River Styx?" The answer was a vision of stout warrior lying in a boat on a quiet black stream in a dark tunnel, being rowed by a gaunt cloaked Mru toward greater blackness. Caernak was dead and had reached his place in the rivers of the Underworld.
How you bring this news to others is up to you. His funeral will be simple and consist only of those closest to him. A symbolic figure made of reeds will be crafted by his best friends and set off to float downriver to the sea, escorted by riverfolk, fish, and newtling that will gather to pay their respects on his final journey. We should play this over e-mail; send your PC's thoughts and actions.
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As a GM, I don't enjoy killing PCs and Caernak was one of my all-time favorite characters, with a rich history (5 years of playing!) and unique personality. I just couldn't find a way to save him without twisting game "reality" too much. Sometimes unlucky choices are made and the dice don't roll kindly. It is perhaps fitting that he died in such a horrible place, leading the fight against evil; if your PCs knew more about where he was and what he was up against it might soften the blow and glorify his death. Anyway, events like this sometimes add a new dimension to campaigns.
Chris, I hope you stay with us and make a new PC. Reasonable options include a dwarf (e.g. Kekidrim), Pavisite (e.g. Groloday), Agimori shaman, Humakti warrior, Vingan, etc. etc. I'd prefer it if you make a new PC rather than take over an NPC. The shaman PC would be a great change of pace.