Of course he'll be babyface. Lets look at the facts.
Kane wanted a baby, check.
Kane's baby was killed by Gene Snitsky, check.
Fans don't like baby killers, semi-check. (I know there are some sick bastards out there...

)
Kane was taken out by Gene Snitsky, check.
More than likely, Kane and Lita will be on good terms, since they had one thing in common, the baby. Which leads me to believe that there may be another baby angle.
Of course, after a while, Matt Hardy will be back. Will be be face? Will he be heel? Who knows!