You have defeated my trials, now you prove your skill in combat. Go to the fighting ring across the road, then use the Signal Torch there so I know you're ready, and we'll settle this once and for all.
I must admit, that fight hurt more than my pride. If not for Chauncey's healing salves, I would not be standing in this spot right now. You have proven your worth to me, [%NAME] - a reward far greater than gold or weapons of magic.
You can go now.