There's a silver weapon in the chest inside the cage. You can grab the silver weapon from the lootable body during the fight. Or you could bring with you silver weapons to the fight.
Some players put off triggering that fight for a bit as there's no real immediate benefit. With the mage areas being added with the next update, a neg reputation with the Wizard might be more harmful.
Also, speaking of updates, there's a quest oddity that allows one to skip the fight with the furious werewolf, if you pay the Wizard off. See
viewtopic.php?f=5&t=14785
That hiccup in quest orders -might- get closed with the next update and if you use that method, you loose out on the positive rep for beating the werewolf, but hey, it's an in-game option.