But this doesn't close the quest.

Running up to the basement after you defeat Mordus, along the way you will pass an open room with a letter from the dwarf queen.
Reading it isn't enough, you must pick it up and then the quest updates.

The journal entry says "We must be careful about who learns of the contents of this letter" regarding the Dwarf Queens letter. I handed it in to Lohar. Not sure if this is the only character who you can take the note to, but it closed the quest for me.

The journal entry says "We must be careful about who learns of the contents of this letter" regarding the Dwarf Queens letter. The letter can either be handed to Lohar (which closes the quest) or taken to Magister Julian on Driftwood Docks, who then gives further quests to kill Lohar.

I can't give the letter from the queen to Lohar, what do I do? What evidence does he want?

Hey, when i went back to collect Lohar's hammer and key he said he couldn't find his key on him. Because of this i could not receive the hammer, which is a pity because its a huge power spike for me. Any one else have the same problem?

There's a switch at the basement near the traps, what's that suppose to do?

Cant find Lohar anymore. After not giving him the letter he is no where to be found. I gave it then to the magisters and have to kill him, quest bugged...

Killing Lohar while Beast is a member of your party will make him leave your party permanently.