That is correct. If you kill a lich and he has no phlactery he dies permanently.
If you kill a lich then destroy his phylactery within some amount of time ( I think it few days) when he reforms his body lich is also dead forever.
If you just destroy his phylactery he is still alive and can make a new one but it takes some time and also some XP.
So they will still need to kill him.

wait, then doesn't that make V an idiot? Even if Xykon was killed he'd just come back

Well V was probably assuming she could find Zykon's phlactery soon after he died with her magical powers. There are plenty of spells one can use depending on how well the phlactery is magically hidden.
For a wizard of V's former power finding and destroying a phlactery before a lich can regenerate should be pretty trivial.

Does this mean it's likely V is currently paralized?

You know, this would be a good time for the resistance groups to make an appearance.

Though, that would probably be too convenient.

I'm going to back 01d by saying that in 3.5, at higher levels, equipment is absolutely everything.

He just got the surprise against Redcloak with a Smite Evil and - most likely! - a critical hit.

Maybe he is secretely a monk with a vow of poverty.... What a twist!

Oh hell yes. And that's not even counting what you can do with cheese. Keen kaorti resin great scimitar = 15+ crit for 4x damage. Give that to a high level fighter, and watch almost everything without massive damage reduction die inside a round.

That wouldn't actually be TOO much of a surprise, given the eastern theme, and that, if I recall correctly, Miko seemed to have a monk level or two.

Miko was also one of the most powerful paladins in the order, most likely due to that monk level set.
Which is exactly why a properly-equipped paladin is far different from a bruised and battered prisoner with a broken length of metal.

Well, given that Miko was pretty much brought up in the order, it seems likely that their soldiers at least have monk training as an option. I would bet on at least a portion of their full blown paladins having started with monk levels before the twelve gods chose them.

Also: And O Chul isn't up there with her?