The Ettin Ghost is the ghost of an ettin who was killed in the tunnels beneath Dragonspear Castle during the last Dragonspear War. He has remained haunting the Underground River ever since, and can be found in the extreme west, to the southwest of the Crusader guard fireplace that lies south of the entrance to The Warrens.
When Gorion's Ward stumbles across him, they can either simply fight the Ettin Ghost to receive 4,000 EXP and the Cloak of the Strange Beast, or attempt to talk to him. If they talk, he will explain that he is haunting these caves looking for his lost Ettin Club. Gorion's Ward can now locate the aforementioned club in the Ettin Ghost Cave, which lies in roughly the central area of the map, on the north side of the river. If given back his club, the grateful Ettin Ghost gives the party the Cloak of the Strange Beast (which he was using as a loincloth, to the evident disgust of Gorion's Ward) and leaves. This grants the party 3,000 EXP.
Note: The presence of M'Khiin Grubdoubler or a Shaman-classed Gorion's Ward may be required in order to communicate with the Ettin Ghost instead of simply fighting with him!