You can acquire the special sand for Sea Hag on the shore of the lake in the northern part of Dalkivar. Look for a big mound of sand - you can highlight it with TAB. For the sword, you can find slabs of Rilvite in Deron-Guld Center. One can be bought from the merchant Crower at the market outside, one can be stolen from Solomon the smith, and one can be found in a locked chest in the Storage Building.