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The sword is hidden away somewhere, and only the amulet can open the chest it is locked in. On the other hand, you could return it to Puck, and she might reward you for doing so. The choice is yours!
I drove myself absolutely crazy trying to find it around the waterfall. It's sneaky, but totally there. Try from the top, watch for secrets on the way down.
It sounds like it bugged on you and you should probably report that. :(
I was able to find a temple door behind the waterfall, but it had a construction sign by it so I assume maybe another quest will open up for Puck
If you just offer to give the amulet to Puck, and not say "for a price" you can get a cool theif headgear what sells for 600g+
-The door is not related to finding the sword. If you read the journal there, it's more likely to do with a wizard than with Puck.
-But oh neat. If you're not into 2H swords and you want a hat, that might actually be worth it.
Edit: okay, I see.... it randomly drops one of 5 possible hero weapons. That is.... sad, I think.