As anyone who's reading this should already know, Harvey Dent was a crusading Gotham City District Attorney, but when half his face was badly scarred in an accident he lost it. His physical deformity and the randomness of it all made him obsessed with duality and with chance, as evidenced by his ever-present coin, which he uses to make important decisions.
In the comics, Dent is often presented as mentally unstable even before becoming Two-Face. The Long Halloween, a storyline that the people behind the current movies have cited as a strong influence, has Harvey violent enough that he might be a murderer. The accident itself is also very different from the movie version, Dent is in the middle of a courtroom questioning when his mob witness pulls out a vial of acid and throws it at Harvey, badly scarring just one side of him.
The movie version is, of course, driven mad only by his own accident, the death of Rachel Dawes, and his scarring is from burns of the non-acidic variety received while being rescued. His apparent death would seem to rule him out for a subsequent movie, but...
Pros: Technically, no one ever took a pulse or anything, and in comic book stories that always leaves an opening, so Two-Face could still be very much alive. And he's an awesome villain. Harvey Dent's downfall was brilliantly portrayed in The Dark Knight, but I felt like Two-Face didn't get enough of his own story.
Cons: I find fake deaths to be infuriating. If Dent can surprisingly turn out to be alive, then so could Rachel or Ra's al Ghul or even Bruce's parents. Or whoever dies next. So, as a viewer, the drama is removed when someone is in a dangerous situation, since I know that even if they appear to die, it could be written away and the character would turn out fine.
How I'd do it: I guess if I had to, I'd flashback to Batman running away. Gordon checks Harvey's pulse to find that he's still alive. At first unsure what to do, Jim remembers that Harvey Dent is the hero that Gotham needs. He arranges for Two-Face to be secretly admitted to Arkham (and this is already suspending disbelief, since half of the guy is a local celebrity) where he would be cared for anonymously. But he breaks out, and then... I'd have him flip his coin and get the good side. He goes to the media and tells about his accident and how he was incarcerated without trial. He blames Batman and the culture of lawlessness he represents. Of course a later coin flip would be scarred side up and we'd get some fun violence.
Casting Guesses: Aaron Eckhart, obviously.
Verdict: Batman stopping him would help to redeem him in the city, and it would make for a pretty good story, but I would still feel cheated by bringing him back after his death scene. I guess it's possible, but I sure hope not.
After The Scarecrow, Ra's Al Ghul, The Joker, and Two-Face, who should be Batman's next enemy in the Batman Begins/The Dark Knight series? Well, as of now we know that Tom Hardy will play Bane and Anne Hathaway will play Catwoman.
Check out the master list for all the villains covered. I've pretty much run out by now. Obviously, there are more Batman villains, but not any of significance that I know of. As of February 2009, no one is confirmed as a villain. Not the Johnny Depp Riddler, not Phillip Seymour Hoffman Penguin, nobody.