I got the impression the story could have continued. The Soul Reaver series seems to have ended, but Blood Omen could have gone on. Kain now had the Soul Reaver, was hopeful things could be changed, there was another chance at 'fixing' things.
That's what I thought the end of Defiance was hinting at, anyway. But no sequel ever happened

Not really. See, Defiance ended in the Blood Omen era, not the present. Not the Soul Reaver 1 era where things are all *bleep*ed up. What Kain meant by "hope" was that now he had the means to fight the previously unseen forces that were corrupting and destroying the land. Before Raz entered the blade he purified Kain's soul; the corrption that had plagued him from his birth was wiped clean, giving him the right and the duty to heal the land. And to do that, he must defeat those forces in the present.

Thats what I mean everytime I bitch the series isn't over...because it isn't. All Defiance did was conclude Raz's story. Kain's Legacy is still in motion. He still needs to destroy the Elder God and restore the Pillars, we need to see how Vorador is resurrected and alive in BO2, and he needs to return the sword back in Avernus so his younger self will be able to discover it, avoiding a Paradox.

Oh and Seeker, the "full circle" thing was Raz's destiny coming full circle. To entered the sword, only to be released centuries later and be used by his former self. His soul is one huge cycle that basically ends in a stalemate (the Oroboros on the floor in SR2 was insanely ironic). Something he was trying to avoid until he realized he was a necessary key in healing the land.

Oh boy, get me talking LOK again...well rightly so. It took me years to fully understand the story. Most complex, mind bending tale I've ever encountered. Best part is, it makes sense. But talking about another LOK game makes me all giddy anyways. I sure wish Naughty Dog would pick up the rights so Amy can put the story to a conclusion.

Just goes to show how much I remember from the games. I'm going to have to replay them.
But I reckon that still counts as a cliffhanger... or at least, something that needs to be further explored. Technically we're back at the beginning, but things still a bit on the fudged-up side. Like you said the Elder God is still around, the pillars still need to be restored, and aren't the Hylden still wandering around too? (or is that in a later timeline?)
Having a sequel where Kain goes around kicking the shit outta things would be good enough for me.

The Hylden were part of the BO2 scenario. All Defiance did was bring that story arc to a close as well, showing the Hylden Lord's rise and his role he played in corrupting the Pillars (he was the Dark Entity posessing Mortanius all along; using Turel as a vessel to control the humans; murdering Ariel), giving him more of a unique background than we were led to believe in BO2, which I really liked, since BO2 had such a bad rap. So that threat was avoided, but since Nosgoth has been so badly corrupted and so much has changed in the timeline since we last left SR1 era, they may very well have broken through the Binding once again and roam the land in the future. And the Hylden Lord did swear they would return.

Also since the Elder God shuns the Hylden as well, he and Kain would have mutual interests in this aspect. I'm sure the Elder God could muster up another flunky in the future to dispose of them like what he did with Moebius.

But yeah, just about anything involving Kain would be good right now. A remake of BO1/SR1 or a conclusion would be satisfactory.