Yes! He is needed for a quest.

I was running from a dragon and a banshee
out in the second wilderness area and
encountered a wandering npc named Jathil
who asked me about some burial grounds.
I didn't have time to stop and chat since
I was in immediate danger. Now that the
crisis has passed, I can't seem to find him
anywhere. I'm worried that he may have
been killed by the dragonbreath or something.

Anyway, I'm wondering if he is important
and whether I should go back and reload
a previous saved game.

Thanks,
John

I don't think the dragon breath killed him. The breath is fairly weak (or maybe my party leader is just resistant to fire).

Search West, Southwest from the dragon spire to find Jathil. He's needed for a very sweet quest!

The quest for Jathil is given at the Temple in Ishad. It's also broken as hell -- once you deliver the message to Jathil, everytime you enter the Ishad temple, every character selected gets 750 XP and another guild level (up to 7).

Painbringer

Trade with him to by an Ankh...