You should check Gawain's fireplace, it has a portal to another world.

Talk to the mother near the bee's place to activate Lebius' come-out quest. Return to the forest; you need to find 3 flowers to give to the mother: one near Kay, one around the centaur, and talk to the centaur to get one more (there are about 3 other flowers in the forest, but they're very hard to find; if lucky, you might stumble upon them and can sell the extras for money)

If the knight gave you the sword it's the end of his quest :D