The Man Who Cried Wolf

Walkthrough
When the Dragonborn first arrives in the Blue Palace, he or she overhears a plea from Varnius Junius to check on the strange goings on in Wolfskull Cave. Varnius is then told that there are not sufficient resources available to look into the problem.

Ask Falk Firebeard about Wolfskull Cave
The Dragonborn can then speak with the steward, Falk Firebeard and offer to investigate the cave.

Clear Out Wolfskull Cave
The next step is to locate the Wolfskull Cave and enter it. Inside are numerous draugrs and skeletons. Further inside, the Dragonborn will find a magical orb with a figure inside which seems to be being fed from several sources. These sources turn out to be necromancers who are trying to summon Queen Potema.

Killing these necromancers and their thralls thwarts the summoning and fulfils the quest.

After having killed the necromancers, the Dragonborn can find a copy of The Refugees near the ritual altar. He can then use the lever on wall to get out.

Speak to Falk Firebeard
Falk Firebeard will be shocked to hear about the summoning of Queen Potema, but very much delighted the Dragonborn resolved the situation so effectively.