Well I have not played the first game of the series. I do not know much of the back story... BUT was Damian not imprisoned in another dimension and was it not there he became ever powerful?
If the answer to this question is yes then I'm pretty sure being locked up in a crystal will be a good thing for us (the heroes) BECAUSE we will have time to become the most powerful being rivalled only by the true dragons... Damian may for now be invincible and destroying the world but that to me leaves the biggest opening for a sequel. Dragon Knight becomes TOO powerful for even Ygerna to keep locked up in a crystal. Then you make it back and take back the world from the egotistical Damian who for the last how ever long has gone UNCHALLANGED and cannot handle the force us (the heroes) bring back to the table?
I may be missing this point completely but seems to me BEING LOCKED UP AND NOT dead is hope enough!!!!