When you arrive at the temple, don't freak out! Karras is there with four Farclan Malgems! Turns out that the Farclan never truly controlled the Pyrkari spirits they were using, it was an infiltration by the Wanton!
Kill the four Malgems (First one, then a second, then the final two together). If you die, and respawn, and run right back to resume the fight, the defeated Malgems do not respawn!
When the final Malgem falls, Karras cries this is not over, and vanishes. Borrin Gammult appears and tells you to meet him at the Searing Brink.