Ah, poor King...
I may be reflecting a lot of what has already been said, but I felt I had to state a few things that I have seen and add my thoughts to them.
To begin with, King has been my favorite character of the story and the King/Pete story arc has been something I have been looking forward to since Christmas. I have been awaiting this confrontation to come to a head and to see the resulting scenario and subsequential fallout. I suppose I expected something a little flashier and probably more devastating to King, but this subtly is really more in style with Pete's overall character and grand scheme's.
But to that regard, King is Toast...Doomed...(whatever negative connotation you prefer here)...
Because Pete has played his Chess piece well I'm afraid (hehehehe punny).
I almost believe that Pete set this up from the moment that Joel had first set eyes on him. Lets be honest, Pete, Dragon, Nine-Tails, etc. are beings that are quasi-omnipresent to full on gods. They see the flow of causality, fate, and time as a complex web that they control and manipulate. Heck, they even made a RPG out of it for cripes sake! The one thing they cannot fully anticipate is destiny, and that is that is one thing we all have partial control over through our actions, desires, and most of all, choices.
Now, you ask, how does this play into what has transpired and how I believe will affect the future? You see, it all begins with why Pete chose Joel to begin with. Pete saw a human that was filled with anger, sadness, bitterness with the world, but deep down still wanted to try to help on some basic level. Pete, after losing his initial avatar, saw a perfect vessel to become his champion, or the Dark Paladin, who feeds on his own internal anger and sorrow as his power source. Now, from this point, Pete sees Joel, what he needs Joel to be, and what the web of time (causality, fate, and so on) has in store for Joel up to that point and possibly the thousands of possible outcomes that could result from different courses of actions that comes from Joel's choices and Pete's interference. Based upon this, Pete was able to plan exactly what would happen to make Joel/King his with the maximum power necessary to win the game.
What I am saying is that this course has been planned by Pete, with even multiple redundancies, to ensure Joel/King is locked into place. Heck, Bailey was a fail safe that I think Pete built in to ensure that he could use at the right moment to herd King back in.
So how will this play into everything, and how will it end?
King gives in to Pete's demands because of the friends, and love, that he has garnered in his new life. Pete exploits King's weaknesses to push King to his absolute breaking point, forcing him to lose everything so that he is simply a being filled with sorrow and rage, having enough power to break the heaven's himself, causing Pete to be triumphant. (If there is anything left worth having after King is done)
King becomes the ultimate Martyr. He sacrifices everything he loves, is hated by everything he loves after destroying their trust, and goes to jail in disgrace to pay for his previous crimes. However, everyone else gets to live a, somewhat, happy ending, Dragon wins the game, and Pete pays the price of being human for 100 years.
In either case, Joel/King can't win. Its either destroying everything, or destroying oneself.
However, I think that choice is the last part of the web that even Pete may not have true control over. Based upon human nature, Joel should choose Scenario 1 right? I mean how many people choose Scenario 2? There aren't any more heroes in this world right?
Also, there is one other factor to play in all this that I have not considered: Pete. Can he live with what he is about to do? Is he truly so malevolent to sacrifice his piece for his goals? Is the old saying of the needs of the many outweigh the needs of the few true enough that Pete believes the ends justify the means?
I would say yes, save for one thing: We see Pete grieve for a fallen avatar. Can Pete be swayed that maybe even he has gone too far and is out of touch for his own dreams?
Now this is all conjecture, but I do have one thing to say:
Rick, after everything is all said and done, please be sure to give King the Saint Template. You can find it in the Book of Exalted deeds. I think when this is all over, one way or another, he will have earned it.
P.S. Rick, love the comic, hope you don't mind the terrible Doctor Who/D&D 3.5 humor. Keep up the good work. Also, to anyone else, sorry about the grammer, no time to proofread.