All talk about a demi lich, i've just beat Shandalar and got the Staff of Magi. Shandalar is not the Demi lich I think??? So, where he is? Can't wait to have a greater Challenge.

Oh my, you really do want a challenge, don't you?

Ok, you asked for it...

SPOILER ...

.
.
.
.
.
.
.
.
.
..

Kangaxx is actually in 3 parts.
1. The door just to the left of the Twisted Rune door leads down to one part of Kangaxx.
2. The tomb in the Unseeing Eye quest contains another part of Kangaxx.
3. The 3rd part of Kangaxx is in the Docks district, in a building just to the left of Mae'var's guildhall.

All 3 tombs, if disturbed, are guarded by liches. When you arrive in the 3rd tomb with the other 2 parts and defeat the lich, Kangaxx the Demi-lich will rise.

STRONG SUGGESTION:

Have a saved game before starting anything in the third tomb!!!!

I won't detail the strategy for defeating Kangaxx here ... since you're looking for a challenge! I'll say only this, I got the strategy from another post on this board.