IIRC the 'lesson' of U8 is that sometimes there are no good solutions and you can't always fix everything. So I'd say they are still hosed.

No one knows, Ultima 8 was intend to be a darker installment of the Age of Armageddon or Guardian trilogy sorta like how Ultima 5 was for the Age of enlightenment or Avatar trilogy but sadly since EA if memory serves had no games ready for the holiday season that year they rushed the game out only about six or seven months in development(or was that from completion? I have to look up the interview with Richard Garriott on what happened with Pagan) but either way alot of plot elements, character developments, and even the world itself was never finished but the point of the game was to force the Avatar into situations where he may or, in the case of what we got, have to do the unthinkable to protect his worlds but I think there was supposed to have been a way for the Avatar to restore or save Pagan.

Which since they didn't get it in the main game but I recall that Lost Vale expansion was going to put those options back in, again don't know for sure since it get canceled last minute after it was all done and ready to be mass produced.

I believe it's been stated by sources from Origin (though I don't recall exactly where) that defeating the titans saved Pagan. Mythran states at some point that defeating the Titans would earn the Avatar the gratitude of all of Pagan.

The game really does a poor job of explaining this though. The last time we saw Pagan it was bombarded with heavy rains and fireballs, so this has lead some to believe that it continued until the world was destroyed. (In fact, the dialog in the game's data files say that there were supposed to be earthquakes and the dead rising up... which obviously got cut)

It's really unfortunate that the game was released so unfinished. I'd love to see the original design docs to know what it would have been like before the plot was cut.

I went back to the U8 usecode to see if I cound find the dialogue I was talking about. Here it s.

First, Mythran's relevant dialogue about defeating the titans.

Avatar -> I want to recreate the obelisk.

Mythran -> Recreate the obelisk? Do you mean that you wish reconstruct the Blackrock obelisk of the Great Temple? Of course! You are hoping to use the conduit as a way to leave Pagan! I know just the spell you will need. You must cast the Ethereal Travel spell. I do not know where the spell will send you on your first attempt, though I expect the Titans will intervene and direct your journey. Should you encounter and defeat them, know that you would have the worship and admiration of all Pagans. Good luck...

And the unused dialogue in Tenebrae:

Run for you life, fool! The Titans have gone mad! Lithos makes the land quake and the dead rise. Run, fool, and hide before the very city falls to the undead onslaught.

'Tis the wrath of the Titans that rains upon us. May they have mercy, for we are all to die! Run while you can.

Hold! You are not undead. I suggest you find a haven and hide, stranger. The walking dead march upon the city!

I suspect that the idea was for Lithos to start having a fit once the Avatar nabbed the Heart of Earth; there wasn't much to its acquisition (unlike with the rest).

Either way, the implication is that, while unleashing the titans caused damage in the short-term, the long-term result of confronting them and leeching their power with the various blackrock fragments would break their hold over Pagan and perhaps unmake them entirely. (Pyros's appearance in U9 was solely for the sake of still being able to use a 'flashback' cutscene they'd already created for with U9's original plot, so it doesn't reflect on what U8's storyline was supposed to be.)

I must say I really hesitated when I had to kill the Titan of Air. She appeared to be the 'good' titan of the four, or just a really good manipulator. Ahh thanks, that clears it up.
Its sort of logical that the disasters are there purely because the Titans are mad that someone is holding their single point of weakness and their deaths would undo all of the supranatural calamities.

While Stratos wasn't actively malevolent, she was still holding the people of Pagan captive, and her beneficence was largely of the sort that you reserve for favored pets.

Mythran isn't the only one who voices support for the Avatar's actions, either. The old fellow (whose name escapes me at the moment) who had traded his sight to resurrect someone and who starts dying when Stratos's power is cut by the Avatar taking the Breath of Wind will also affirm (if found and spoken to quickly enough) that the Avatar is doing the right thing.

The theme of Ultima 8 wasn't exactly "There are no good solutions," it was "Sometimes you have to fight fire with fire." There are good outcomes (not the least of which is liberating Pagan from the Titans' grip), but this time around the Avatar can't achieve those outcomes while still being a paragon of virtue - he has to play dirty to succeed. The Guardian's opening taunt included, "I shall parade you before your conquered peoples as the fallen idol of a pathetic ideal," for a reason...

Thanks Garran and everyone for clearing this up, I sleep a little better :)
Did a bit of look see and his name was Stellos ..
There's actually some interesting reading here for anyone interested further in the mythology of Pagan

http://codex.ultimaaiera.com/wiki/Stellos
http://codex.ultimaaiera.com/wiki/Theurgists
http://codex.ultimaaiera.com/wiki/Eye_of_Stratos

ah ha! Stratos has an agenda

on article about Theurgists
"Their main occupation is to heal the people of the land, so that even more people would flock to their order, so that Stratos' power over the land would grow even more."

Richard Garriott's take on Ultima VIII was always that it was the story of a priest who finds himself dumped in the middle of an urban gangland, and is forced to pick up a gun and fight his way out if he has any hope of survival. How would he react, and what consequences would it have on his faith?

Unfortunately, due to the factors we all know so well, that theme doesn't really play into the completed product. As for the "consequences" angle, that was supposed to play into the plot of Ultima IX in that the Guardian was going to taunt Lord British with images of you being a very naughty Avatar while in Pagan (and on Serpent Isle, for that matter), which would have seen LB gradually turn against you as the game progressed. But that development was one of the casualties of the infamous plot overhaul IX received, alas.