Super Compression
The key to the Blood Spirit Distillation was to use the spirit of a material to refine it. This process purged all impurities and waste, leaving behind only its absolute essence.
The "spirit" in question wasn't exactly the "soul" of the being but rather the essence that defined its existence. It was the remnant of a soul left behind in the corpse and flesh, bound to it and unable to part. A true soul, by nature, is flexible and can adapt to become any being in existence, but a "spirit" anchors it to its current form.
For instance, a soul could incarnate as a plant in one life, an insect in another, a dog in a third, and perhaps a human in a fourth. What defined them in each incarnation was the "spirit," which conformed the soul to its present existence. This spirit was bound to the corpse and was the origin of the bloodline.