I wouldn't say its a hole in the story, I think its just people interpreted it wrong. My opinion is that the Hero of Oakvale is, in fact dead. He would have had to been alive for 500 years. The only heroes capable of this feat is Theresa (the Hero of Oakvales sister), Scythe ( a.k.a. William Black, the greatest living Hero) and Reaver (who gets immortality from the Shadow Court).
One interesting point is description of Serenity Farm. On the description of the house, it mentions that many great Heroes have lived there, including the one who vanquished Jack of Blades. It then says that he spent his last years there.
If you read a book called the immortalists, it contains a theory that many Archons still may walk the earth, in hiding or concealment. We know that the Hero of Oakvale is a descendant of The first Archon, William Black, also known as Scythe. Thus, it is possible that he is living, but not likely.