The Schooolhouse can be found in Westfall, at the rough co-ordinates of (41,66). Just look for the building that is similar in appearance to the building where Clerk Daltry may be found, the starter of this quest.
To complete this quest, one must look in the Old Footlocker, which can be found in the main room just before the elevated front.
Opening the Footlocker releases a Forlorn Spirit. The spirit will not attack you whilst the log is up from opening the footlocker, but once you close it you will have to kill it. The spirit is reasonably easy, however it can cast polymorph as well as Curse of Stalvan.
The Forlorn Spirit appears whenever you open a container within this quest, and many believe it to be the spirit of Tilloa, whom you will learn more about during the rest of the quest series.