Did you find the book the librarian was looking for? If so, the second volume will be in your quest item list (same name) after you return the first. Read it and you will find the spell needed to turn Amdusias human again (it requires a couple ingredients, which you may or may not have found yet).

If you have not found the book yet, explore everywhere, and open all the chests.
The key is upstairs in the quarters, in one of the rooms (hidden behind a false wall with Amdusias' chest), while the chest with the book is downstairs.