"Arcalius has asked me to locate Stilus and negotiate a peace. He says the Knights will accept whatever peace I can get, but I doubt that is entirely true. I must find some kind of fair peace or it will be short lived. Either way this won't be easy. I must find Stilus in order to talk to him. He is definitely in the Slums, but I have been told to expect a welcoming committee if I just walk through the gates. I need to find a way to sneak into the Slums, but I should be prepared for a fight anyway."
Arcalius wants you to go into the Slums and find Stilus. Walking in will result in you being attacked on sight, so it's back to the Sewers. Stilus is in the basement of the Abandoned House in the Slums. There are two ways of entering; you could use the Sewers and enter the Slums, sneak to the house and pick the lock and enter that way, or you could enter the basement directly from the Sewers. There is a stationery guard by the (locked) entrance to the house from the Sewers, as well as a roving guard who passes near there. It is possible, albeit difficult, to sneak past them both.
Credit: ed_conn and Bethesda SoftworksOnce in the basement, Stilus will approach you and initiate conversation. You have three options; you can say you surrender, in which case you immediately return to the castle, not the best result for yourself. Alternatively, you can say you will claim the throne with Stilus' death, which causes him to attack. Alternatively, you can tell Stilus he cannot rule either. This final option requires you to suggest that Stilus reconcile with Brend partway through the conversation, otherwise Stilus will again attack.
Return to the castle Throne Room.
Also in the Abandoned House, on a table in a small room of the room closes to the sewer entrance, is the Diary of Stilus Varo, which can be taken to Virginia for the quest The Historian.
"Glorvin has asked me to negotiate a peace with Brend. He says the Righteous will accept whatever peace I can get, but I doubt that is entirely true. I must find some kind of fair peace or it will be short lived. Either way this won't be easy. I must talk to Brend. He is definitely in the Castle, most likely the Throne Room, but I have been told to expect a welcoming committee if I just walk through the gates. I need to find a way to sneak into the Castle, but I should be prepared for a fight anyway."
Glorvin wants you to return to the castle and find Brend. You will need to sneak into the castle again as was done in the quest A Book.
Once in the castle, make your way to the Throne Room and wait for Brend to approach you and initiate conversation. Again, you can surrender, and again this isn't your best option, or that you will claim the throne with Brend's death, which causes him to attack. The final option is to tell Brend he cannot rule either. You also need to suggest that Brend reconcile with Stilus partway through the conversation, or he will still attack.
Return to the basement of the house for sale with Brend. Brend appears to be bugged here; he will constantly approach you saying "I HAVE NO GREETING" and will often not follow you through doors. You need to wait by the door until he approaches and initiates a conversation, then go through it.
Varo's Knights and The Righteous
If both Brend and Stilus have stepped down, Arcalius or Glorvin makes you Count. You receive 2,000 Gold and an ebony weapon of your choice. You can also use the Count's chambers when in town. If you ask Stilus if there is anything more you can do, he says that both he and Brend are going to leave Windfall Island. This completes the quest and this quest series. Brend and Stilus both being alive and surrendering gives you the best reward; other situations may result in you getting nothing, only 1,000 Gold or only 2,000 Gold. You only get the sword and to be named Count if they are both alive and you didn't surrender.