A guy managed to imprison two cyclopes in the lighthouse basement and forced them to make weapons.
Note: you will need at least two players to complete this quest!
Go to the lighthouse southwest of Thais and go down into the basement. You will enter a square room with a corpse in it. This body contains a book telling you about a secret dungeon. To access this dungeon, you'll have to find a lever under some crates which will make a ladder leading down appear. Once down, you can go to the north, south and right. The north passage leads to a switchplate that will make stairs appear at the south end once someone stands on it. The other person must go down the stairs and turn a lever. Once turned, this lever will make the teleporter leading to the quest room appear in the right passage. There are only 2 Cyclopes in there, which can be either fought or ignored. The chests containing the Dark Shield and Battle Hammer are at the north end of the room.