Yes, Oloril is now a crocodile. How did this happen? Well, the party, sans Kaelthiros, re-entered V's lair to pillage and plunder to their hearts' content. In the process the encountered V's twin (whom they killed), treasure chests (which they retrieved), and, oh yes, a magical book . . . that Oloril touched. And what was his reward for doing so? Correct! He turned into a crocodile! A crocodile who's mind is now nothing more than a brutish consciousness.
Let's evaluate the current status of the party:
Kaelthiros - Dead
Oloril - A Crocodile
Stumpy, er, Dain - Minus a Hand
Murry - Um, somehow just fine . . .
Time to head to the nearest town to recuperate!