Hey, this is more of a helper for those who might be having trouble, rather than a question, but here goes...
I just finished this quest last night and found out a pretty easy way to kill that "boss" ghost who holds the key. Once all the ghosts on the ship were dead, I made sure I had full health and magic and saved it right before entering the trap door that leads to his room. For some reason, if you fight him and see that you're not going to win, you can run back to the entrance of the ship and then go back to his door and wait there as long as you want and he'll never come out...He's so slow that you kind of have to lure him out. Anyway, its also good to know that not all weapons work against ghosts...My di katana (something like that) is a 2-handed sword with 9 dmg, but it doesn't do anything to them. On the other hand, my 1-handed sword (steel longsword - 5 dmg), works fine.
Anyway, as far as the enemy goes, he's kind of tough (I'm level 6) and he uses a health-drain spell that doesn't seem to be stopped much when I use my staff of silencing.. Anyhow, you can EASILY beat him. Just make him chase you outside the boat(more room and you can see easier). Once outside, you can get just close enough to hit him when you swing your sword and then BACK OFF. He'll try to attack. Beware though, if you run too far away, he'll either just stay there, or start going back to the boat and you'll need to go get him again. I just used a method of slash-slash-back off and if I got too low on health, I just ran away and healed myself until I had my health high enough to go back and fight. It took a little while, but eventually he fell and I got the key.
I just wanted to share this with others who maybe were having some trouble on this guy or who wanted a suggestion on defeating him. He's really not hard at all, if you use this method. I decided to write this because all the walkthroughs I read kind of grazed over this part by saying something like, "Go the the ship. Kill ghosts and the "head" ghost. Loot key. Unlock door to free shackles on skeleton." Anyway, enjoy.

dude u can also use a powerfull staff such as the mages...

and hotkey health potions...

This message was edited by Tyhon on Aug 31 2006.

Well, that's the only staff I have right now. Hotkey health potions? Really? Not sure how one would do that. I only had a couple going into the boat, but used them prior to the final battle. Health potions are kind of expensive. I need to find a way to make more $$. I guess you can call this the poor man's way of defeating him.

i had LOADS of trouble with this quest, though none at all in the arena (go figure). i saved it before his trapdoor, and must have reloaded like 30 times before i won. Anyways, i dropped my spare weapons outside to prevent his curse from making me overencumbered, and went in in sneak. on the odd occasion he'd be facing away and i could get a sneak attack in, which helped. Then attack him when his hand glows red (doesnt work if you are cursed, coz he doesnt need to burse you again), and draw back before he touches you. If he lunges at you normally (without a red haand) you just block it. i found it useful to only attack when he had a red hand, coz he wouldnt defend himself while red and couldnt attack straight after.

Again, I like my way. I lured him outside where there's more room and its not as dark. I loaded it quite a few times before I realized how easy it is the way that I discovered.
As for $$, I can kinda cheat and save right before betting on a fight and reload every time I don't win. I've also won the first 5 or so fights. I just beat the wood elf chicks....they were a pain. Kill that archer first.

I died once
then I had to reenter the ship
and I beated him with my level 6 character, only used a silver axe :S he was easy, health got critical, but I healed a lot...


edit: ofcourse the treasure wasn't great, I wonder if u go back later, if its refilled

This message was edited by Tyhon on Sep 08 2006.

Yeah, the treasure was pretty crappy, as is most treasure chests that I encounter. Just a bunch of mostly-useless food items, potions and small amounts of gold. I just started alchemy recently, but so far I'm not too impressed with the potions I'm making. Maybe it gets better.
Silver axe huh? I'm Lvl 7 now and have been using Dai katana(sp?) a 2-handed sword w/ 9 dmg/30-something weight, since lv 2 or so. I still have not seen anything better on a merchant or anywhere else. I think I got this when I killed someone.