Okay, first of all, the wherewolf leader is the one who has the baby in his possesion you refer to late in your posts. So I think you should just let him chance, maybe it would make a difference in his inventory.
about killing all wolfz, you should also kill all wherez in the forests. and It might help to solve all sub-quests. retrieve this cloack, find some herbs for a woman, retrieve a little doll and some other. Did u also find the amulet in the chest in the flipping elfs house ?? and the Sword of Balduran ???
Also, the mysterious lock (it says that it has a magical lock, if I'm right) can only be opened, like all of these locks, by a key OR by an action like reaching an objective.
The door will be opened by a helpfull hand when you're in trouble
Ps, killing everyone might not be a bad idea. you'll see what I mean.
Solution : Just replay the WWI and just solve EVERYTHING and talk to EVERYONE and take a look at the WHOLE island. that should do it.
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