Spoiler
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He can be killed (although as Dundee correctly states not via quest means). However, as soon as he is attacked, he turns hostile and escapes via dimension door. Since he is drow, he has high magic resistance, as well as impressive saving throws (against spells anyway). You can therefore try and stun him with a high level chromatic orb/other holding spell, and then hack him to pieces. (although this will take many attempts!). However, last time I played this, he used dimension door, but did not leave the map, he just moved to another location within the village - the temple to be exact, upon where he recieved a savage beating from my team of ultimate badasses.
However, if you choose to leave him well alone, I wouldn't worry because
*SPOILER*
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He makes another apperance in IWD II
