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I assume you killed Valeria's group. 4 people including one spellcaster worth lots of XP.
The Fallen Paladins can be found in the northern part of the bridge district. If you come through the gate turn right immediately (from your POV) and head in direction of the water. The access to the Fallen Paladin's meeting point is pretty well hidden by buildings.
Keldorn will be recognized by Anarg, you won't get the offer to join his gang. But you will lose only a minor amount of XP and the possibility to spare Reynauld's life. (The paladin who talks to you when you met them the first time...)
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Man is wolf to dwarves
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