The thrilling conclusion...
The party left the chapel and arrived at Varn. The whole vale was cloaked in a thick fog from the lake. They were confused to find that the villagers recognized them, and while the crowd was pestering them, Nesa noticed the man she killed in her dream lurking in an alley. Predictably, she went to investigate and found that he had vanished. The PCs went to the council meeting...
The PCs gave their conflicting stories to the council, but when Nesa saw Deorn in the back and recognized him, she insisted on pestering him. That's the problem with my players -- once they've put their minds on something, they never drop it and let things flow.

I RP'ed Deorn answering her questions without hinting that they've met. However, when the council suggested sending the PCs back to the ruins with Deorn to purify it, everything went crazy. The priest, Father Harn, refused to work with a Demorthen and claimed that he could purify it himself, and Nesa refused to go with him because she believed that her dream where she met Deorn was a premonition about what would happen if they went back.
I resolved the argument by having the Ansaleir dismiss everyone and say that they would discuss it further in the morning, after the PCs have had a chance to rest. (Since they weren't actually going out with Deorn, I knew I just needed to end the scene and not get them to agree).
During the night, Nesa dreamed about her brother Terent and realized that she had killed him in her dream. The whole scene was very intense, and her player was excellent at capturing Nesa's desperation at losing her brother. Additionally, I used this scene to create a hook with Nesa's backstory: Terent revealed that he was an agent working with a Magientist lodge trying to find out who was behind their grandfather's disappearance, and he had to hide his true profession to protect her.
The next morning, I was worried that the players were going to want to actually head back to the factory, but Nesa and Saeth figured out Verzal's puzzle. Saeth, the paranoid occultist, hired a young lad with a rusty sword to be his bodyguard while they traveled out to the island (The boy chuckled to himself, "Easiest 4 embers I ever made!"). They found the inscription but couldn't make the Travel check, so the boy suggested they see this old man in town. He pointed them to the right spot, so they went there, despite Father Harn's constant insistence that they wouldn't find anything.
After they found Verzal's will, I narrated the transition into Act III: The fog became so thick that they couldn't see farther than 10 feet, and the trees nearby crashed into the ground, their bark petrified into wood and collapsed into rubble, exposing long metal girders inside. The grass burned away leaving a cold cement and metal floor. They blacked out for a moment and found themselves repeating the events of the first scene... (I drew heavy inspiration from the Otherworld transitions from the Silent Hill series for this effect)
Nesa was horrified over having killed her brother. After they returned to the real world, I told the PCs from Reizh that they each had a tonic that was given to them for the expedition. Nesa used it to try to revive her brother, even though she knew it was too late for him (I had to give her full XP just for that act alone). They found out about Deorn and Jearon and went through the refinery, expecting to be attacked at any moment.
After they reached Gluta's sanctuary, all Hell broke loose. I had barely finished reading the dialogue between Deorn and Jearon/Verzal when the players started announcing that they were going to try shooting Jearon, or running between them, and Father Harn began throwing Divine Cold at Jearon.
Needless to say, I was completely caught off guard. The players completely jumped the gun, and I was worried that they were going to miss this excellent scene by killing one or both of the antagonists. The whole scene that followed was a complete brawl as Father Harn tried to exorcise Verzal's spirit by blasting him with Divine Cold; Saeth, Nesa, and Ninel tried to stop Father Harn by tackling him to the ground; and Ned tried to protect Father Harn by interrupting those three.
I had to get the players under control by mixing in Deorn's and Verzal's arguments as the battle was going on. Ultimately, Father Harn decided to give the spirit one chance to explain itself, and in that time Verzal was able to speak his peace. Meanwhile, people were trying to sneak into the secret lab, the PCs were attacking one another... True chaos. The Reizhites, as I predicted, wanted to help Verzal, but Father Harn was extremely difficult to rein in. Ultimately, though, he was willing to make a vow to Verzal that he would reveal Deorn's crimes if Verzal vowed to leave. Meaning that the tide turned against Deorn...
Deorn summoned the swamp creatures (although I had to shoot down Harn's player who objected that Deorn shouldn't be able to summon such a power without everyone having a chance to interrupt

). Fortunately, with Verzal's help and Nesa's powerful energetic gauntlets Artifact, the party survived without any PCs going into Agony. However, Father Harn did make a point to cast Divine Cold on the last swamp creature AND Deorn, despite the fact that he was exhausted from the summoning and practically helpless. Instead of figuring out how much HP Deorn had, I just ruled that he was put into Agony.
After the battle, a lucky roll by Saeth saved Deorn's life, since Verzal wanted him alive to face punishment. Verzal led them into the laboratory, where they argued even longer about what to do with the fossil Flux. Father Harn thought it was a Cursed Stone and should be destroyed, Saeth thought it was Amber and wanted to study it, and the Magientists wanted to take it back to Reizh to use as fuel and to experiment on. Verzal told them that they could do whatever they wanted with the fossil Flux as long as they revealed Deorn's crimes. He left Jearon's body, and the PCs explained everything to Jearon after he woke up.
I gave the PCs two extra documents from searching Verzal's lab: A clue leading them ultimately to a very powerful, ancient Artifact, and a second document containing schematics for the Arbaflux (for my players to craft for themselves at a later point).
They returned to Varn with Deorn and Jearon, but instead of causing a riot in public, they met with the Ansaleir and his council in private. They failed to convince him to reveal Deorn's crimes publicly, but Jearon -- a trusted figure in Melwan -- was able to corroborate their story. The Ansaleir insisted that Deorn would be punished by the other Demorthen when they convened the next year -- refusing to announce the crime publicly. As for the fossil Flux, the Magientists tried to convince him to allow more Magientists to come in and drain the pockets of fossil Flux, because at this point he was so frustrated that he refused to look at the documents that they had found. The Ansaleir saw a flash of Verzal's agonized face in the crystal, which made some of the players realize that his spirit was still bound to the world. There was another massive argument as all the PCs were arguing at cross-purposes, and the Ansaleir eventually threatened to throw them out until he ultimately stormed out and told them all to leave.
However, on the way out, Ninel shouted out the nature of Deorn's crimes to the crowd that had gathered outside the assembly hall... She would have been torn apart by the mob had Jearon not stepped in to support her and to call for Deorn to confess in front of everyone.
Meanwhile, Ned and Father Harn were walking off with the fossil Flux. However, Ned, who was holding the crystal, suddenly had a flash of memory wherein he saw Verzal's gruesome murder at the hands of Deorn and his co-conspirators. He failed a Mental Resistance check and dropped the Flux, standing there in a stupor for 1 minute.
I had someone in the crowd approach Deorn in disbelief and say, "It's not true, is it?" In a barely audible whisper, he said, "It is." The rowdy crowd turned riotous, and the PCs quickly left.
Upon returning to Saint Nyline's chapel, Father Harn found that he had, in fact, been there with two other Templars, Jaber and Urvan. Jaber tried to allay everyone's anger by coming up with a compromise: He and Harn would pray over the crystal and determine whether any demonic influence was within it, and, if not, then the Reizhites could keep it for study. Harn was highly upset when no evil forces were detected and Jaber gave the crystal to the Reizhites, but Harn was willing to trust him and only asked him to venture to the ruined factory and make sure that that place was clear of evil influence.
Phew! What a session. Fortunately, it seems like everyone enjoys the game, and everyone loved the Loch Varn scenario itself, especially the "dream within a dream" (which forced them to work together when they might not normally) and the parts in which each PC had different information or memories.
Next stop: Return to Melwan and give a report, then on to Dearg, and then to Reizh...
My personal favorite part as GM:
I really enjoyed this session. One of my personal highlights was creating the village of Varn on the fly. I told the players exactly where their PCs were staying and used that to add flavor. For example, Nesa was accommodated by a young couple that had just lost a child to sickness and was put in the child's old room. The boy that Saeth hired was a nameless NPC at first, but I gave him a name when they asked and had him interject comments in response to events. The old fisherman who helped them figure out the cartographic coordinates was only supposed to exist long enough to help them find Verzal's will, but after they asked him who's gone out to the island in the past, he began telling a raunchy story about how he went out there with a girl named Becca in his youth; Father Harn asked, "Is Becca your wife?" and the man replied, "She was." Harn asked, "You divorced her?!" to which the fisherman replied, sadly, "No, sir -- fever took her." Harn apologized and gave the man his condolences and blessing.