He is one of two in the NW section of Great Borrows. His brother, Gaerdrick, drops the first half of the key for the quest [+23 An Ancient Story of Evil.] To get to the room is rather difficult - most who have been refer to it as the maze area. The most specific directions I can give is that its in the far NW corner of the map. Just before you get to it you wind down a stair case that takes you below the hall that took you there, so the minimap doesnt reveal the room very appropriately. Also, the room is a large square room below another square room, so its practically invisible on the minimap. In terms of Gaerthel, he does NOT need to be killed in the encounter to get the key, you only have to kill his brother. However, to get to the chest inbetween the two brothers - you have to kill them both. So, quest for half the kill - loot for both. I won't divulge the encounter as its a rather fun one to figure out. The only advice to give is to fight the *active* (hint) boss at the bottom of the stairs for interception (hint) purposes.