This whole piece is very metaphorical, meaning that it should be understood as non-physical. (It's possible that it is physical, also, if it is from a science fiction book.) It seems to me like the "cloud" is the pain that is all around him. "Encompassed in" means that something is surrounded by something else to the extent that it almost becomes a part of the thing surrounding it. The author confirms this by saying that the person is "of which he was now merely the fiery heart." This statement could serve to mean multiple things. First of all, the man is the "heart" of the cloud of pain. The heart can be either the physical center or the defining essence of something. But the "heart" is also a word we use to talk about emotion, so I have a feeling that the author is using it to say both that he is trapped in the center of the pain, but also that he is now at a point that he is only living through intense ("fiery") emotion, and not through his physical sense ("without material substance"). The author could also mean that the person himself has become so much a part of the cloud that he has turned into the defining essence, or the thing that keeps the cloud alive. I would not be surprised if the author intended all of these meanings because he or she seems to choose their words carefully and intentionally.