When Siegfried willingly reclaimed Soul Edge after killing the maddened court jester Isuka, he gave his mind & soul to the weapon, transforming into a frightening demonic warrior called Nightmare. With much of its power restored, Soul Edge also transformed with him, once again revealing the eyeballs it once had.
In Soulcalibur II, it appears as two of Nightmare’s weapons. Nightmare's default weapon, although labled as Soul Edge, is the weapon in its damaged incomplete form, with various cracks along its blade and loose stringing flesh dangling from its body. Its original completed form, labled as Soul Edge (Growth), can be unlocked as well. In Soulcalibur III, it again appears as one of Nightmare’s weapons.