VERY IMPORTANT NOTE If you complete Transmogrification, talk to the Droag that spawns after you kill the Doom Lord and he will call any named you haven't killed to him, who then drop -A Treasure Chest- on the ground, which can contain masters!
To open the locked door. In the room with the fountain in the middle of it (not too far from the start, it's right after the big Square room with groups of droags and the guy in the jail cell), kill everything and go upstairs. You have to kill the sleeping droags in the barracks (they are non aggro). Once you do that, the key appears on a table by the door.