-- cut-scene --
This battle versus Twinblade is all about dodging and rolling. First thing you should note, however, is that the bandits lining the outside of the ring will attack you if you get too close to them, so try to stay near the center of the ring whenever possible.
What you should do is get relatively close to Twinblade and start rolling to a side. He'll launch melee attacks at you, but shouldn't be able to hit you if you keep rolling. Eventually, he'll pull up his arms and thrust his blades into the ground. When he does this, he'll be vulnerable to attacks. Quickly move to his back or side and hit him a few times with your weapon.
If you want to try to speed up the battle, you can try using magic or sneaking in melee attacks in between his attacks. As you can see in the video above, though, this can be a tough task as the timing needs to be perfect. -- cut-scene --
Immediately after the cut-scene, head into Twinblade's tent and find three chests as well as a bunch of barrels. In the chests you'll find 250 Gold, a Resurrection Phial, and 500 Gold. Now head back out to Twinblade.
If you don't want to incur any bad deed points, simply exit the area to complete the mission.
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