CotCT 6B: Assault on Castle Korvosa - Evidence vs. Villain

[Jenceslav]

While playing the scenario 6B, I encountered a head-scratching situation. The party consisted of Merisiel, Hakon: Blackjack, Varian.

Scenario (paraphrased) wrote:

When you would close the location, search the location for an Evidence, if there is one, do not close the location. … You may banish the Evidence.

Later in the scenario, Merisiel defeated Togomor in Cells with 3 more locations open, shuffling the Villain somewhere. Hakon closed Cliffs the next turn and moved to Arsenal. There he encountered Sermingatto his next turn - Varian guarded the Castle, Merisiel guarded the Cells.

Hakon successfully defeated the Villain and started closing the location. But ouch! Evidence was there.
…
Ugh. What next? *scratch scratch*
So, the Villain was defeated, which leads to automatic closure of a location; the scenario rules trump the closing as there is Evidence in the location (it was banished promptly). Therefore, the location did not close. I played it (most probably wrong) by banishing the Villain and trying to close the other locations the hard way. It did not work, I was 2 explores short and ran out of time.
Later, going through the rules step by step, I assume the correct action is that the Arsenal would not be closed, probably is not guarded, so the Villain escapes into it again. However, all the other cards remain there, as there was no other Villain and the location would close.

So I wanted to ask, what is the actual resolution rules-wise?
1) (very improbable) Villain was defeated and we won.
2) The first bullet point for "When Villain is defeated" step applies, location is closed not closed, Evidence is banished (or reloaded, but Hakon chose not to) and cards remain there. Villain in the next step escapes to the same location and is shuffled back in.
3) As number 2, but all cards are banished first - that is, if the procedure for closing of the location in the Villain step is overruled only in the point of "close the location".
4) (what I did)
5) something else?

I am pretty sure now that the number 2 is the correct answer, but wanted to ask just in case. I don't mind replaying the scenario, especially when Varian found the nice Staff of Greater Healing.

[skizzerz]

Number 2 is closest to the correct answer. The location cannot be closed, so you skip the step "If you Defeated a Villain, Close the Villain's Location" entirely (note: the part in bold is still part of the instructions and the bit you process first, it's not just there for decoration or to act as a heading). The text in that step refers to what you do in order to close the location, but since you can't close it, there's nothing to do there -- you don't search the location for additional villains and you don't process either of the bullet points.

See also this post regarding a similar situation.

[Jenceslav]

Thank you, Skizzerz. In that case, the scenario playthrough wasn't "screwed" (I screwed it by not doing steps in proper order) and we might have won rather easily, once Hakon would have digged through the Armory for the Villain again. Varian would have been chilling out in the Castle, Merisiel in the Cell (playing dice with fellow inmates and/or gaolers).
OK, good to know. Evidences are really mean in this scenario (even though Varian defeated 2 in 1 turn using Formian Myrmidon).