Laneel the Gnome emissary is a gnome ambassador found in Keldagrim, the capital of the Dwarven Realm. Prior to completion of The Giant Dwarf, he can be found in The Red Axe's Office.
Laneel can be found in The Red Axe's room in the Keldagrim palace, in a meeting with Hreidmar. After The Giant Dwarf is completed, he disappears. Likewise, two gnome travellers can be found in the King's Axe Inn, and also disappear after the quest.
During Forgettable Tale of a Drunken Dwarf, it is revealed that the gnomes are actually from Arposandra, the city founded by the mage Glouphrie. He was sent to see that Hreidmar, The Red Axe director, was making progress in the production of chaos dwarves. Although details are foggy, it would seem Arposandra wants to use chaos dwarves in their growing army. The player's mind is erased before the quest ends, leaving them with no memory of Hreidmar's true plans.