The locked door that the key opens is in the same room as the dragon statue (to the left as you enter the room, on the outside wall). There is a chest behind a locked door, containing a diary and random crappy loot, then stairs down to the right to a dead end containing crates, etc, and a grate that can not be opened. It sounds like you found the bottom section, and just need to head up and to the left to get to the door.
