Ok here is the story. No, you can not get the Wakizishi from this quest =(
It is in Mistmoore but has nothing to do with Arlena. Lord Grimlot does
want you to bring back Arlena's bones and give them to him, what that does
who knows. Lord Grimlot has two forms, an easy skeleton form, and a super
hard Human in full plate form, sometimes with Opal Scythe sometimes with
some type of good scimitar. The way to get Lord Grimlot to spawn is to go
to the skeleton camp just outside the bridge in south karana. gotta clear
the camp and hope he spawns at night. we got him to spawn first night, and
had a dark elf necro talk to him, and got him to talk about his lost love,
but he wanted bones not lute. myself and my bard friend didn't want to risk
losing our lutes (that do nothing, but you never know). a level 50 druid
friend of mine took his level 25+ bard and went to Grimlot. with his bard
he used his mask of the deceiver to become a dark elf and sang charismatic
carillon on Grimlot. Grimlot was no longer KOS but was amiable i think, got
him to talk about the quest, and gave him the lute. all Grimlot did was
equip the lute, so they had to kill him but was able to loot the lute
(hehe).

Shada