The guy - part of the quest NPC - tells us he was dominated by a very foreign, definitely not human mind. And we know the illithids roam the sewers, infiltrating the city (see the WindspearKey/Wand of Wonders event, or JanJansen Summoned Home quest).

But while I see how they benefit from healing the locals, I see no reason behind Lilarcor.

I always figured it was Lilarcor itself that somehow dominated him. The whole quest came across as Lilarcor being too puffed up with its own importance and putting together a bad author-insert fan-fiction where some random schmoe proves himself a hero by solving a grand puzzle and is rewarded with an amazing artifact. Then they go on to do great things because of course the artifact has a grand destiny. Iirc, Lilarcor is the one telling the riddles, etc.

Granted, domination isn't actually (apparently) in Lilarcor's power set, but that's what I always figured.

It never occurred to me that mind flayers might have done it. As you say, it doesn't really do them any good.

There is no evidence whatsoever that the mind flayers created the sword.

"Lawrence Lilarcor was well known, not for being brave, but as an idiot. As the tale goes, the boastful Lilarcor left his village at the urging of his friends so that the "great hero" could do battle with a devious Treant. He walked for days in the dead of winter until, feverish, he found his target and began an epic wrestling match. Unfortunately (or perhaps luckily), the "Treant" was nothing more than a craggy old normal oak. His friends had been jesting, not actually expecting that Lilarcor would go fight the fictitiously dangerous tree. That might have been the end of it, but Lilarcor, not really knowing what a Treant was in the first, didn't realize the truth. He eventually uprooted the oak and, marching proudly home, he declared himself a hero. Thus was born a laughing stock of epic proportions, and over time the name of Lilarcor became the sacrificial fool in many tales of "less than brilliance".It is not known whether this enchanted weapon is Lilarcor himself, perhaps imprisoned by an evil mage or some other odd coincidence of fate, but it certainly acts in a manner consistent with his level of competence. If it is he, he has never bemoaned his captivity. He might not realize, or care, that he is no longer a human.As a weapon, Lilarcor has its uses, but many a warrior has eventually given it away. Banter such as "Ouch, that musta hurt", "Oh yeah! Got 'im good", and "Beware my bite for it might...might...might really hurt or something" is a constant barrage on a warrior's psyche."

You misunderstand.I said the illithids hided the sword. One reason could be they didn't like it opposed their powers. No idea why didn't just destroyed it. Maybe Lilarcor is undestructable.

I didn't misunderstand your words. The title of this thread is, "Why did the mind lfyers create the Lilarcor quest?" Nowhere did you say anything about hiding the sword. Also, nowhere in the game is there any suggestion that the Illithids had anything to do with Lilarcor.

Nothing in the quest makes sense. It's not supposed to. Why were the two skeletons in that particular position? Who put a severed hand in the sewer grate? Why would anyone need a talking sword to begin with?

You misunderstand a lot.

1) I never said MFs created the sword. I said they created THE QUEST involving the sword.
2) And what is the quest? A barrier thatprevents you getting the sword. You instead have to pass a series of puzzles both involving wits and muscle. The hided the sword behind obstacles.
3) As I pointed out the quest involves a dominated person (Quallo). Guess what race's ability is to enslave minds?
And oh my, we know from twoquests, the MFs are lurking in the sewers, and along the Jan Jansen quest we even meet one right in the same sewer the sword is!
So yes, there are plenty of suggestions. It's a +3 weapon with range. Perfect to destroy adamantite golems.

If you ask about the creation ofa talking sword, well, in case of Lilarcor it was an accident. But otherwise two minds are better than one. Also, adventurers can be lonely too.

Game developers design quests, not game npcs. Again, I never misunderstood your words. Your words which you are changing again to suit your needs (dropping the "hiding"). Or maybe it's a case of language barrier. But whatever, I never misunderstood your words.