The renegade Ger is attacking the town (from DL3?)
 

My town was under attack by Ger. I ran around fruitlessly trying to find him, as he set traps, cursed and petrified people. Finally I went to talk to the warmaster and he gave me a quest to kill Ger on dungeon level 3.

This is the first time I have had a being attacked by a monster who is not actually in the town! Is this intended behavior?

Did he go back down to the dungeon?

I never found him in the town, and he set traps while I was running around. When I finally went to the warmaster and was given the quest, I found Ger on level 3 of the dungeon and killed him.