This town quest has lead me all the way to the docks, search everywhere (for the most part) and cant find the wolf.

Have you found the burnt corpse yet? This is the body of Grundel (Scanthril quest) and is found in between Dragonspire and Stout Mines in a clearing in the middle.. The mines permit is lying next to this body.. Once you have found this body, than the werewolf will appear near that area..

Didnt find the body yet, I got into the mines by offering the keeper of the writs some booger ale, he gave me a writ to get in. Will look further for the body, thanks.