I was one of the first to learn what happened to the Faldric Forest from a mystic wood elf who managed to escape while the forest was completely tainted. The people of the forest fled from a battle with Dark Elves and Dwarves after suffering heavy losses. The Outcast came to them and promised to turn creatures of the forest into ones that could protect them from attack. He showed them that he could make a cat many times its normal size and just as strong, and they agreed to let him protect them. However, to do so he tainted the entire forest with Chaos, and while the creatures did scare off the Dark Elves and Dwarves, they soon turned on the mystics and began attacking them as well. Since then the mystic wood elves have been essentially trapped in their own forest, and they had to pull back their remaining people to the central city. They have been starving and without means to obtain resources, and most of the mystics' leaders have died. They attempted an exodus of many about 50 years ago, but they were massacred by the beasts. They seem to come from chaos-tainted pools of water around the forest. We have taken care of most of them, but the biggest and most important remains tainted, and Eldandiril and I have to perform a ritual to cleanse it, we will definitely accept any help in reaching this pool next market day, since as it is the largest tainted pool, it will most likely protect itself more viciously than the rest.
In short, it seems this Outcast will be deceptive and act like he will help you or is doing something beneficial, but nothing he says should be completely trusted, and seems to have no sense of mercy.
Also, when the World Dragon was changing the world, it was bitten by something just as the elders were about to be taken away, and I am not sure of the truth of this, but there are at least a few of us who believe this Outcast, who was formerly a vampire, was the one who bit it, and that may be how he became as powerful as he is.
I hope this information is helpful, although you may want to have it verified by others, as I have admittedly little experience in adventuring and may not know the exact details.