The Party will find Ike in Ulgoth's Beard. He offers tours of Durlag's Tower. He charges the party 60 Gold to provide the tours. After accepting the payment, he move towards the Inn located in Ulgoth's Beard.
Ike will then be found in the area containing Durlag's Tower, at the base of the gate leading to the dungeon areas, talking to Ike will cause him to move into the tower, where he will attempt to sell you Rune Stones (check for HPL) when the party either buys or does not buy the rune stone (Check for real or fake) Demonknight appears, claims ownership of the tower, then proceeds to cast Fireball, killing the tourists and Ike.
In pre enhanced edition, killing of Demonknight was possible via the casting of Greater Malison, followed by usage of Wand of Paralyzation, enabling the party a chance of killing Demonknight. This event has likely been circumvented in the enhanced edition by the Demonknight's magical resistance.