Harkyn's Castle  
 
Spoilers, Level 3

The answer to the riddle is 'Skull Tavern'. 
There are 4 groups of 99 berserkers each in the barracks (Mind Blade is a good spell here). 
The Old Statue is the god Tarjan; killing him will teleport you to Kylearan's Tower (you need the eye in your inventory). Get your bearings before wandering around or else you might wander out past the gates... 
You can teleport around on this level, so you can avoid just about anything that you don't want to deal with. 
 
1 A sign on the wall read, "The Barracks." 
2 The Crystal Sword will leave the crystal guardian in many pieces. 
R Riddle 
T Old Statue 
 
