i knew keldorn was a buggy guy but this...
"i was walking on the street after doing haer-daelis quest and was quite exhausted. i rested at the..(yada yada cut to the chase) ok i was going to sell some goods and keldorn my packrat was carreing most of the stuff. when i was going to sell a harp i noticed it was not red. i whent in to the inventory and
tried to equip the harp. it worked! keldorn can use harps! i doubt he has a nice singing voice but still!

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http://www.angelfire.com/rpg/wildleprechaun/demon.gif
and the sky will rain fire...

The Harp of Discord that you find in Mekrath's laboratory is usable by any class, I think! Most instruments are only usable by Bards.

On the subject of bards, what rewards do you get for finishing their stronghold quest (putting on a play)? Is it just money you get, or do you get any interesting magic instruments or similar items?

A lot of the bard musical instruments (like harp of discord) are bugged allowing paladins to use them. They say bards only, but it allows paladins to equip them.