i have just challenged the druid and jaheira defeated him and have gone back to the town and have been asked to find the rakshasa by the genies but i cannot find it, can anyone help?

In the same forest where you defeated the druid there is a house at the east end of the area. There is a Goblin strong-hold or something there as well...the Cat people are in there,(the house, not the strong-hold)

Go to the northeast part of the town (beyond the graveyard) and speak to a shadow thief. She'll let you know where to find your target.