Within that window, he tells of how his crew were either slaughtered or taken captive by the fabled Floating Hangman. He also noticed a nearby island littered with other wrecked ships, so he holds out a sliver of hope that some of his crew may yet live.
Travel to any of the districts on the map of Splintered Reef, and you'll get interrupted with a battle against several Darguls and a Grave Hound.
You'll start off at #1 on the map of The Pickled Eel. Speak to Copperhead at #4, which becomes the point where this Quest overlaps for a little bit with the Quest called A Paradise of the Mind.
Speaking to him triggers the entrance of the Fampyr named Zulka through the door at #1. She and her bodyguards are hostile, unlike the rest of the patrons. She also has two surviving captives from Lofell's ship brought into the room at #5.
The most straightforward way to complete the Quest is to bring yourself within Zulka's view to start the fight. That means the rest of the undead patrons will go hostile and attack you as well. So on that note, be sure to buy anything you might want from the Tavern Keeper at #3 before speaking to Copperhead.
Alternatively, you can also have the whole party go into Stealth mode and leave while Zulka wanders away from the door at #1. Complete the Quest called A Paradise of the Mind, come back here, and Zulka will be gone.
Now speak to the captives to free them, and earn 4,000+ xp to complete the Quest.
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"*SEE all things. SEE their strength. SEE their WEAKNESS. JUDGE all things. If MERCY has eaten their hearts, they will FALL beneath JUSTICE. Your WILL gives you the RIGHT. Your DISCIPLINE gives you the RIGHT.*" -Vhailor, Planescape: Torment