I think Redcloak is going to intentionally get Xykon killed, which is going to make it much harder for Evil to win - after all, all those undead are under Xykon's conrol, and without him, they're going to be free-willed. I can see it degenerating into a melee between the undead and the goblinoids outside the city walls, while Azure City waits to see who they have to deal with after the fighting stops.
I wouldn't be surprised if this plotline got one of the main characters killed before it resolves, however. There's a death sentence hanging over at least two of 'em, after all (Durkon and Belkar, from the oracle's words).