By Royal Decree II

Objective
Slay the dire wyrm that dwells at the Watergod's Altar.

Details
"In the name of the mighty conqueror, King Theodore the Bold, you are hereby ordered to offer up the corpse of a dragon of ice in tribute."

Walkthrough
The Dire Wyrm is located in Watergod's Altar. It can be found in the same spot where you fight Cyclops during the quest The Watergod's Altar.