Spoilers
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1. Nope. In fact, he will become unstable and attack other members of your party (especially Aerie).
2. You get no exp. from his knighthood quest if he fails, and he does fail when you tell him to avenge his sister's murder.
2A. The game is prejudiced towards good parties. Evil parties generally get screwed on both monetary and experience rewards when following the evil path. It ain't easy being evil, but it is more fullfilling (especially after playing through the game as a goody-goody party).
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"This place will be your tomb."