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The cloak of reflections is in the Sahaguin city on the dead body of a Sahaguin pristess. Sheis with her retinue near the centre of the map I think. It reflects magical DAMAGE back at the source so not things like slow, dispel magic etc etc. Using it is considered a touch cheesy (As is using the shield of Balduran) I prefer hasting my characters then following in several fireballs or other area effect spells-seems fairer to the big round guys somehow. Just try not to get involved against too many gauths/beholders at once because they will rip your party apart at low/moderate level.
My personal antithesis is the bloody mindflayer-sod them all
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