Someone in the Lower Ward (I forget who) recounts the story of a man leading a rebellion against The Lady of Pain. This rebel leader is supposed to have opened up portals to the lower planes, creating the terrible smog that exists there now.

It sounds like this mysterious rebel is eventually going to be revealed to be TNO, but I have not discovered any more of this story arc.

Did I miss something about this in my game, or was that the extent of the narrative?

Nah, I don't think you're missing anything. I think it's one of those little snippets of information that they just randomly sprinkled out there in the game world to rouse curiosity and speculation. Personally I never gleaned any additional information regarding this issue.

in the book, which is basicly games dialogues put together, the rebel leader is identified as the nameless one.

in the book he has a flashback about this rebellion and remembers how he died at that time(he was killed by lady of pain)