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Burz at the monastery has the dead frog. I picked it from his pocket one time. I think it's a joke item, or maybe one of those "unfinished bits" in the game.
As for spells, there is both a minimum level and a minimum skill requirement for learning them. Do check Flamestryke's list so you know what they are.
You do best by working for both sides and then getting them to ally at the end. Lots more experience that way.
Nightowl2
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