My friend got the Lost Sword from the soldiers at Kingshead... really shows that you can get it anywhere, anytime.
A strategy I picked up is that if you spend lots of time at a particular area, it pays out like an arcade machine. Let's say Player 1 spent an hour at Timothy Dartan, but had to go AFK. Player 2 comes to Timothy and starts fighting. Within minutes he has the Lost Sword, when Player 1 spent an hour there and didn't find anything. I think it's all area cycles.
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