If the residual soul is used for crafting an item, it's consumed (or transformed, depending how you look at it). The rest of the soul reincarnates at that point, albeit at roughly 10% reduced power. The net effect is that if you use the souls of Chaotic monsters for magic items, the strength of Chaotic souls reincarnating is reduced. The gods of Law in Aura do not see this as immoral. There's a war on. These metaphysics and rules will be detailed in the Auran Empire Campaign Setting.
Divine Power of Creatures
The total amount of divine power possessed by a creature is equal to ten times its XP value. When a creature dies, about 90% of this value rapidly transmigrates; the other 10% remains as a residue within the creature’s blood or organs, which can be harvested as special components for magical research. When a creature is sacrificed, 80% of its divine power passes to the entity worshipped, 10% is retained by the sacrificer for his own ends, and 10% remains residual within its blood and organs. This why XP value = special component value = sacrifice value.
A living creature will generate excess divine power each day equal to 6% of its XP value. For example, a mage with HD 14** (worth 3,800XP) therefore has (3,800 x 6%) about 230 points of divine power available. Casters use some of this to fuel their spells (a 14th level mage’s spells cost about 190 spell points). The rest is dissipated or bequeathed to a god through worship. (As with sacrifice, a cleric that leads a congregant in worship collects 10% while the god collects the rest). Once expended, the creature’s divine power will recharge through food, drink, and sleep – the living body fuels the soul.