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The Blue Fairy is in that area and to talk to her about Permission, you need the quest to Gather Flowers: For the Wise Woman of Foggy Islands, gather 10 each of Red Madder, Yellow Weld and Blue Woad flowers. You also need Outfit points greater than 25 and Persuade of at least 30.
It looks like you've already been there. When you climb up the ladder to the Blue Fairy's Domain, if you have the Fairy Wings cape, you can reach that area. It's on the shelf in the room of the Fairy Queen. I think you killed her.
It's sellable but there's no harm because you can buy it. : )
I do that with a lot of items because people are often losing things. This way if the item is sellable, they can get it again. It means Elendil doesn't have to do so many updates to give an item to Phredd to sell because someone lost the item.
Needlenose the Tailor is in Humbria Castle. You might have to camp out to get it. Or sleep in an inn a few days. Just mark at Needlenose and sleep until it appears in his inventory.
There's no problem as long as you can handle the monsters. : ) Congratulations on getting that far. There is some gear at the beginning that might help you.