Below are the instructions for the Arcane staff quest in South Newport, as well as recommended levels for what you need to do. I'm putting this together as no one could answer questions for me when I asked about it in game 
To start the quest you need to go to South Newport and give 15 gold to the GM sitting behind the podium in the magic user's guild. Not sure exactly what his or the other 2 GMs names are in there, but this guy is surrounded by light behind a podium. Anyways, you give him 15 gold and he'll give you a piece of wood and a crystal. he says ask the two GMs next to you for instuctions on how to enchant the pieces. Say the word "wood" and the GM will tell you basically that you need 1 cat's eye agate, 1 minor shielding scroll, the piece of wood, and a piece of gloomweed (or gimmerweed, my brain sucks at remembering stuff) from the bad river in West Badlands. basically for the gloomweed, zone to WB, jump in the water, keep your eyes open for high level zombies in the water (red to a level 14), and watch the ground for a little bag. That'll finishes that part up. Go back to the GM (the one on your left if you're looking at the GM behind the podium) and give him the 4 items. He'll give you the enchanted wood and say once you enchant your crystal to put them both (the enchanted crystal and enchanted wood) into a forge to combine and you'll have the staff. now for the tricky part. When you say the word "crystal" you're told that you need to go to Blackburrow to use the power of their crystal to infuse your own. I HIGHLY recommend either getting a REALLY strong group, or if you're stuck soloing like me, wait till level 16 when you get invisibility and recast in a corner away from everything as needed. There's a pedestal tucked away in a corner underneith a walkway in Blackburrow. The easiest way to describe it's location is as follows. Go into BB, and head to the door that leads underground. From the room that has an exit to the right and straight ahead, go right, and follow the walkways. Always look for the doors with paws, the look nearby. It's hidden quite well, and without a coordinate system, I can't give you an exact location. Just stay invis and look closely. Once you click on the pedestal, you'll get another crystal, which is where I got confused. It didn't enchant the crystal you carry on you. Take this "enchanting crystal" and put it in ANY forge with the enchanted wood, and you'll get the Arcane Staff.
I do apologize for not giving an exact location of the crystal, but as I said, it's hidden quite well and there's no real landmarks in there other than the paw doors, but there's many different ones.
To start the quest you need to go to South Newport and give 15 gold to the GM sitting behind the podium in the magic user's guild. Not sure exactly what his or the other 2 GMs names are in there, but this guy is surrounded by light behind a podium. Anyways, you give him 15 gold and he'll give you a piece of wood and a crystal. he says ask the two GMs next to you for instuctions on how to enchant the pieces. Say the word "wood" and the GM will tell you basically that you need 1 cat's eye agate, 1 minor shielding scroll, the piece of wood, and a piece of gloomweed (or gimmerweed, my brain sucks at remembering stuff) from the bad river in West Badlands. basically for the gloomweed, zone to WB, jump in the water, keep your eyes open for high level zombies in the water (red to a level 14), and watch the ground for a little bag. That'll finishes that part up. Go back to the GM (the one on your left if you're looking at the GM behind the podium) and give him the 4 items. He'll give you the enchanted wood and say once you enchant your crystal to put them both (the enchanted crystal and enchanted wood) into a forge to combine and you'll have the staff. now for the tricky part. When you say the word "crystal" you're told that you need to go to Blackburrow to use the power of their crystal to infuse your own. I HIGHLY recommend either getting a REALLY strong group, or if you're stuck soloing like me, wait till level 16 when you get invisibility and recast in a corner away from everything as needed. There's a pedestal tucked away in a corner underneith a walkway in Blackburrow. The easiest way to describe it's location is as follows. Go into BB, and head to the door that leads underground. From the room that has an exit to the right and straight ahead, go right, and follow the walkways. Always look for the doors with paws, the look nearby. It's hidden quite well, and without a coordinate system, I can't give you an exact location. Just stay invis and look closely. Once you click on the pedestal, you'll get another crystal, which is where I got confused. It didn't enchant the crystal you carry on you. Take this "enchanting crystal" and put it in ANY forge with the enchanted wood, and you'll get the Arcane Staff.
I do apologize for not giving an exact location of the crystal, but as I said, it's hidden quite well and there's no real landmarks in there other than the paw doors, but there's many different ones.