here is how you can get the Axe of Stone
Quest: Retrieve the Axe of Stone
Solution: In order to persuade the dwarven representative, Eolus, to join the Council of Seven, you have to find out what happened to the Axe of Stone first. The dwarves blame the elves for stealing the axe. You should go and talk to Gregor Dunatrim, the mayor of Glenborus in the local town hall. Tell him you would like to see the elf prisoner in the cellar under the town hall. Talk to the elf, then get some booze from Rimmer and talk to Gregor again.