OK now we all saw Zhao being pulled into the water by the ocean spirit yes? Well I've been thinking about this for some time and I don't think he's dead. My reasons are: When Sokka was taken by a spirit that was angry at people for destroying his forest the spirit still didn't kill him only kept him in a "Holding Area" of the spirit world. Now that spirit had a right to be angry due to the fact that his trees were killed. But the Ocean spirit can't make that same clam.
Seeing the moon spirit die is what made it angry and that's why it started destroying the Fire Nation boats but then after seeing that the Moon had come back (meaning the Moon Spirit was alive again) the ocean spirit stopped attacking and withdrew back into the village. Now the reason I think that Zhao is alive is because killing Zhao now would be Murder and that would be evil. The Ocean spirit is all about balance and peace. If the Moon had stayed gone then maybe it would be just but with the Moon alive the Ocean spirit wouldn't be in the right for killing him. And I think the Ocean spirit knows that and he took Zhao to one of the "Holding Areas" Like Sokka was.
Now my other reason for thinking that Zhao is alive is because of how the series finale will be set up. Now Aang, Katara, Sokka, Zuko, and everyone else will be fighting Ozai when the Comet arrives, and that fight will take place somewhere in the Fire Nation. Now here's something no one here has thought about. When the Comet comes Ozai will have already sent the mass of his army into the Capital of the Earth Kingdom to use the power to destroy it once and for all. Now here is where it's going to get complicated, Even if Aang and Co. beat the Fire Lord and Zuko becomes the new Fire Lord how are they going to stop the Fire Nation from destroying the Earth Capital anyway? There is no way of sending a message to the battle field explaining what has happened and even if the message would magically get there very few would believe and continue the attack.
Now here comes Zhao, Zhao is the only person we have seen in the entire series who has control over the Fire Nation military, not only does he have authority but a massive amount of it. Now here is where the "Holding Area" comes into play. During his time in the "Area" he becomes good and agrees to help Zuko and Co. Then he goes to the Capital of the Earth Kingdom the same time Zuko, Aang and the others go to the Fire Nation. They beat the Fire Lord and Zhao orders everyone to stop their attack on Bai Sing Sei. Now since he has such military power he may have the full authority to do such a thing. Then the show can end.
Now why do I think he will stop the Fire Nation? Well the writers have gone out of their way to make Zhao very powerful in the military yes? Well I don't believe the soul reason for this is so he could amass the army to attack the North Pole. Because if that was the writer???s plans then there would have been no reason to have Zhao be promoted from Commander to Admiral since he would have had the authority to command the Captains with his Commander Authority. But at the rank of Admiral he might have the power to stop an army directly under the order of the Fire Lord. He is the only logic possibility to stop the Fire Nation from attacking and ultimately (With the power from the Comet)destroy the Earth Kingdom Capital.
*Takes a deep breath*
Well there you have it. My thoughts on the subject.
Yes that's right I thought long and hard about it.