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Personally, I think it's better to leave Fael alone (especially if the PC is of good alignment; after all, he doesn't attack you). My lawful good PC didn't even bother to talk to Fael, just went on completing the various quests in Chapter 2 (and killing Rejiek if I stumbled on him again in Trademeet).
Don't think this quest is really related to the Twisted Rune.
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