It could be argued that the 'good' solution to the quest earns you the gratitude, while the 'evil' solution gives the loot.

In the starting area, head out of the village and follow along the mountains going north west. You will pass where Mouse was, then head upwards and past the 'Lost Cavern' cave, accessed by a hatch near a teleporter shrine and another teleporter platform that you need a password to use. Keep going north west, past a couple goblin tents, and there is a large door to get into the cave with the necromancer. This is north of the ruined chappel (with the entrance to the secret passage to break the bandit out of jail, if you took that quest).