The Mercykiller Ring is available from Deidre, the "Bonus CD" merchant in the Adventure Mart. Another (cheesy) way you can increase your trap setting chances is to save before setting each trap, and reload if unsuccessful. The paladin stronghold is available from the Windspear Hills quest...
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You have to make sure that you don't kill the dragon, then get the quest from the Order of the Radiant Hart in the Temple District, and then go back and slay it. (I *think* this is right - I've never played a paladin - don't like 'em - so I haven't actually done this.)
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