Actually, Tsukiko's suggestion is pretty good one. Even if Xyklon finds himself regenerated inside a sea-monster, he's a Epic level sorceror. And unless there's a sea-creature version of some magic-eating monster that I'm not aware of, I think the only problem it will be is how much pressure will it be get out of wherever the heck it is.
Yeah, there's really not a lot of justification for not using the "kill yourself and regen" trick. Have Xykon dispel the cloister on himself, kill himself, and then Tsukiko and Redcloak can use divination magic to locate him and teleport him back. Then they know where the amulet is and can go fetch it.
It's mostly a plot thing, I'd say.