[guided]The argument here is the heart of the proof: we show that any maximal element of $\mathcal{S}$ must have domain equal to all of $\bar{K}$.
Suppose $F_0 \subsetneq \bar{K}$ and pick $\alpha \in \bar{K} \setminus F_0$. Why is $\alpha$ algebraic over $F_0$? Because $\alpha \in \bar{K}$ and $\bar{K}$ is algebraic over $K$, there is a polynomial $Q \in K[x] \subseteq F_0[x]$ with $Q(\alpha) = 0$. Hence $\alpha$ is algebraic over $F_0$ (its minimal polynomial over $F_0$ divides $Q$).
Let $P_{\alpha} \in F_0[x]$ be the minimal polynomial of $\alpha$ over $F_0$, which is monic, irreducible, and of some degree $d \geq 1$. We want to "push" this polynomial through $\phi$ and find a root on the other side.
The isomorphism $\phi \colon F_0 \xrightarrow{\sim} \phi(F_0)$ extends to a ring isomorphism $\tilde{\phi} \colon F_0[x] \xrightarrow{\sim} \phi(F_0)[x]$ by acting on coefficients. Ring isomorphisms preserve irreducibility: if $\tilde{\phi}(P_{\alpha}) = g \cdot h$ were a non-trivial factorisation in $\phi(F_0)[x]$, then $P_{\alpha} = \tilde{\phi}^{-1}(g) \cdot \tilde{\phi}^{-1}(h)$ would be a non-trivial factorisation in $F_0[x]$, contradicting irreducibility of $P_{\alpha}$. So $\tilde{\phi}(P_{\alpha})$ is irreducible over $\phi(F_0)$.
Now we use that $\bar{K}'$ is algebraically closed: the polynomial $\tilde{\phi}(P_{\alpha}) \in \phi(F_0)[x] \subseteq \bar{K}'[x]$ is non-constant (its degree is $d \geq 1$), so it has a root $\beta \in \bar{K}'$.
Since $\tilde{\phi}(P_{\alpha})$ is irreducible over $\phi(F_0)$ and $\beta$ is one of its roots, $\tilde{\phi}(P_{\alpha})$ is the minimal polynomial of $\beta$ over $\phi(F_0)$, so $[\phi(F_0)(\beta) : \phi(F_0)] = d = [F_0(\alpha) : F_0]$.
The extension map $\Phi \colon F_0(\alpha) \to \bar{K}'$ is defined by sending $\alpha \mapsto \beta$ and acting as $\phi$ on $F_0$. More precisely, every element of $F_0(\alpha)$ has a unique representation $c_0 + c_1\alpha + \cdots + c_{d-1}\alpha^{d-1}$ with $c_i \in F_0$, and we set
\begin{align*}
\Phi(c_0 + c_1\alpha + \cdots + c_{d-1}\alpha^{d-1}) = \phi(c_0) + \phi(c_1)\beta + \cdots + \phi(c_{d-1})\beta^{d-1}.
\end{align*}
Why is $\Phi$ a field homomorphism? The isomorphism $F_0(\alpha) \cong F_0[x]/(P_{\alpha})$ identifies $\alpha$ with the coset $x + (P_{\alpha})$. The composite
\begin{align*}
F_0[x] \xrightarrow{\tilde{\phi}} \phi(F_0)[x] \xrightarrow{\operatorname{ev}_{\beta}} \bar{K}'
\end{align*}
sends $P_{\alpha}$ to $\tilde{\phi}(P_{\alpha})(\beta) = 0$, so the kernel contains $(P_{\alpha})$. By the universal property of quotient rings, this composite factors through $F_0[x]/(P_{\alpha}) \cong F_0(\alpha)$, yielding the field homomorphism $\Phi$. Since $(P_{\alpha})$ is a maximal ideal (as $P_{\alpha}$ is irreducible and $F_0[x]$ is a PID), the quotient is a field, so the induced map is either zero or injective. It is non-zero because $\Phi(1) = \phi(1) = 1$, hence injective.
By construction $\Phi|_{F_0} = \phi$ and $\Phi$ fixes $K$ pointwise, so $(\Phi, F_0(\alpha)) \in \mathcal{S}$. Since $\alpha \in F_0(\alpha) \setminus F_0$, the field $F_0(\alpha)$ strictly contains $F_0$, so $(\phi, F_0) < (\Phi, F_0(\alpha))$. This contradicts the maximality of $(\phi, F_0)$.
The contradiction forces $F_0 = \bar{K}$, so $\phi$ is defined on all of $\bar{K}$. Since every field homomorphism is injective ($\ker \phi$ is an ideal of the field $\bar{K}$, hence $\{0\}$ or $\bar{K}$; the latter is excluded by $\phi(1) = 1$), the map $\phi \colon \bar{K} \to \bar{K}'$ is an injective $K$-homomorphism.[/guided]