This was interesting to debate in 1998, but right now it's a little bit old. Anyway.
A big bug (Warlord Nephilim, if you want) falls into Blair. Blair apparently fires his weapon.
The gate collapses. Apparently, one of the towers gets through it as it does so. Some people say it does, some say it doesn't. I think it doesn't, but take a look at the game using HC1's WC Movie Viewer and take your own conclusions.
They search for Blair, but nothing is ever found. Confed holds a symbolic funeral for him.
It's anything but clear, and it's that way by design. He disappeared in a mythical way so it's not "impossible" for him to get back, just very unlikely. A number of things could've happen, and the odds are against him. But the possibility that he somehow managed to survive can't be ruled out, and it's supposed to be this way.
Perhaps Origin didn't know what to do with Blair once a new player character was in place. Giving Blair a desk job or non-flying position wasn?t seen as a good thing for such a character.
It's not a bad way to go. It's pretty clear that he's not likely to come back, but there's always that little "what if" around.
Blair?s redemption was on WC4. WCP was supposed to be about Casey.