The Serpent Key is a required quest item, so it shouldn't disappear.
First of all, check all of your character's inventories; they may have it there, especially if Kreug gave it to you to begin with. Also, check the floor VERY carefully in the room where you killed him. Use Spirit Eye if necessary.
Since the post above gave you the spoiler to answer the questions, it isn't necessary to get the Serpent idol, but if you want to get it anyway just for "closure", check to see if you can find the key.
Hope this helps!
Sazerac.
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