I would think that it would be hard to fake Harvey's death since there's paramedics, police and Arkam staff to be silenced and it would be bound to get out somehow. But he might not be dead and it would be cool to open a third movie with revealing Batman and Gordon are keeping Harvey's institutionalization in the depths of Arkam a secret and Aaron Eckhart's said he would like to return to the role.

But, there's not that many places to take the character besides a redemptive arc or make him even more insane (a split personality developing could be interesting, Harvey vs. Two Face). I'd be pretty hard to top Harvey's fall, although if anyone can, it's Chris Nolan.