Start by talking to King Arthur in Camelot castle. Ask if you can join the Knights of the Round Table, and he'll ask you to do a quest. He wants you to free Merlin, who was trapped in a giant crystal.
Talk to Sir Gawain, who can be found wandering around the ground floor of the castle. He suggests that you see Morgan in Keep Le Faye. Go upstairs now and talk to Sir Lancelot, and he'll tell you the only way to get in is from the sea.
One If By Sea...
Head south out of Camelot, and follow the path to Catherby. Speak to Arhein, the General Store shop owner on the dock just south of the bank. He will tell you that he does bring supplies into the Keep via boat, but he won't let you go.
Instead, head behind the candle shop (slightly to the northwest of Arhein). You will find some crates there, one of which you can hide in. Now you have to click through a bunch of dialogue, but you will eventually be outside the back entrance of Keep Le Faye.
Enter the keep and run up the stairs, then more stairs, to the top floor. You will see Sir Mordred. Talk to him, then he will attack you. As you are about to kill him, Morgan will appear and beg you to spare him. Spare him, and Morgan will tell you how to release Merlin.
Run back downstairs after talking to Morgan, and go out the front door of the Keep. You will see some Giant Bats nearby, kill one and take the Bat bones.
Return to Catherby, and talk to the Candlemaker in his shop next to the bank. Ask him about the black candle, and he will tell you he will only make it if you provide the wax. Go into the building just north of the bank and pick up the insect repellent from the table. Head due west of Catherby to the bee hives (next to the flax field).
Take the nearby bucket, then use the repellent on one of the hives. The bees will leave, then use the bucket on the hive to get wax. Return to the candlemaker.
Go to Taverly, on the east side of White Wolf Mountain. Go to the lake's peninsula in the southeast corner of Taverly, and you will see the Lady of the Lake. Ask her about the sword, but she asks you to go to the Jewellery Shop in Port Sarim. Make sure you have the bread!
As you are about to enter the shop, a beggar will appear, asking for food. Give him the bread, and he will turn into the Lady of the Lake. She will award you the sword, Excalibur.
Finally, head to Varrock. In southeast Varrock is a Zamorakian temple. Look at the chaos altar there, and you will find the words, Snarthon Candtrick Termanto.
Return to Camelot, but instead of going into the castle, while in the fence, head east around the castle, to a roofed area to the northeast. There will be a symbol on the ground. While standing on the symbol, light the black candle and drop the bat bones (be careful not to bury!).
Thrantax the Mighty will appear. Say the correct magic words, Snarthon Candtrick Termanto. It will be under your control, and you will ask for it to free Merlin.
Go into Camelot castle now, and go to the top of the southeast tower where Merlin is imprisoned in a giant crystal. Click to shatter the crystal, then head back downstairs and speak to King Arthur!