I was actually spot on when I guessed that talking to someone in the bar would help. I talked to a man slumped up against a wall that I hadn't seen previously and he officially gave me the quest. Oh, and he actually told me where the creature was -- outside the West Gate, near the city (that is, in the first area).
This is pretty easy to find. I don't know if the wolf changes positions, but otherwise you just go down a little and curve round a small 'island'. The wolf is around the other side with two regular-sized wolves. I killed the poor doggy, headed back to Tomaji's and spoke to the man slumped against the wall again. He gave me some rewards, but nothing seemed to change. In fact, all that happened was that two more clan quests appeared on the map.
I went back to Daran's. I don't know if I wasn't paying attention the first time (I honestly thought I was!) or if killing the wolf changed what he said, but he told me to go to Downtown North and go to the place marked on the map. I went, and met a man who - I think - said he'd tell me about the man whose sword I'd got. There was a cut scene, with many of the men accusing Basch.
Vaan defends him and Basch joined my party -- and not as a guest! He also came with many licence points to customise him properly. He's levelled up quite a bit since he was last in my party -- he was at level fifteen, two more than me. We headed for Tomaji's and there was a cut scene before we even got there.
"My brother's death was not your fault. He believed in you and he wasn't mistaken to do so."
From memory, of course. ^^ Anyway, in the bar, Fran and Balflear rejoin your party! And... there are so many Special Looks between all four of them, that I really don't know which pairing I like the best anymore. Nicely played, Squeenix.
After that, we're meant to go to the Airship Terminal. I'm leaving it there for now. I'll know where to go next time I play and I really spent way too long figuring out the above.