This is one of the places I would have used some GM magic to not allow a TPK, as you have already noted that the story is somewhat dependent on successful outcome from the encounter. Not only that, but now the original crew members, to be potential allies in the future, are all still stuck on the island too. They are an integral part of the race as well, as without them no one knows there is a Saventh-Yi.
Lots of options, but I would choose between something like these to keep story congruency without a lot of GM hand waving (hopefully I am still remembering the story good enough to be giving good advice):
- Have the new party encounter Yarzoth in or near Eleder, discovering his notes and whatnot, and picking up from there. The major issue, though, is the other faction NPCs are still stuck on the Shiv and there is no one to "race" against. Though, the factions could become aware of Saventh-Yi as a result of this new confrontation with the serpent-folk and the PCs subsequent attempts to get his notes translated.
- The mephit could have returned to the rest of the NPCs, letting them know what happened (maybe they did or didn't explore the temple). Then, have the Shiv NPCs complete the lighthouse lighting and get themselves rescued. The factions now all know of Saventh-Yi, and your new PCs will have to pick a faction and work from there.
- (Similar to above, but without skipping the Shiv) Make your players all pick from the NPCs on the Shiv and have them still work through escaping. Once that happens, they can decide bring in new characters as part of the faction they side with during the race and exploration of Saventh-Yi.
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I had a vaguely similar situation where my players couldn't figure out how to open the cave at all, so they just lit the lighthouse and left. The suggestion at the end of the book, "Have the Pathfinder Society hire them to go back and do more exploring" worked magnificently.
So I would say let a little time pass, and do a bit of what justaworm suggests:
- If there are any NPCs left alive on the island, they do the lighthouse thing and get rescued (behind the scenes)
- Again behind the scenes, the NPCs talk about their ordeals, and their sightings of a snake lady and strange lightning in the sky
- The players pick a faction (I'm running kids, so I chose the Pathfinders for them), build a group of PCs for that faction, and are hired to go explore the temple that the NPCs are rambling on about.
OK. Now they're several weeks behind "schedule". But it gives you all the more opportunity to say, "You find this critical clue. But the tracks around it indicate someone was here at least two weeks ago..."
...and then let them start catching up. Works wonders! And just imagine their elation when they finally catch her!
I was originally thinking of GM magic and saying, "Pharasma said you're not supposed to die here." And they all come back to life in the temple, but as new characters. Yarzoth is gone, story continues.
I am glad to hear you didn't go this route. As a player this is never satisfying. :)
A lot of times, the GM magic involved can just be making provisions for one PC to live. In this case, one or more of the characters could have been "saved" by the cannibals, coming to their senses only to be surround by hungry looking ghouls binding them and carrying them away.
On a good note, any further TPK from here on out can be more easily overcome as the various factions can just keep pumping bodies into the expedition.