The weapon the deals the killing blow to the Hound of Hirot is supposed to become magical too.
In the group I've run through that adventure, the weapon that finally killed the Hound was a pitchfork. So awesome. Pitchfork of POWER!
On magic item distribution: There shouldn't be any, and there shouldn't be any expectation of distribution. In fact, you should make any magical thing that the party finds (a spell formula, an alchemists lab, any spell that the party wizard casts) so friggin' scary and potentially detrimental to the user and the receiver that everyone is afraid to even pick up something that *might* be magical.
Even an item created by a "good" entity (or a servant of) means that something beyond the ken of man decided to interfere in the affairs of man so much that they bent the laws of reality to create a permanent or semi-permanent relic -- a relic full of the entity's purpose, will, and power. These are things that should not be taken lightly in the style of game laid out by DCC rules.
But, it's also your game, so you can do whatever the hell you want.
AKA Paul Wolfe
The Mystic Bull: Check out our two FREE prehistoric adventures: The Steading of the Nergalites AND The Tribe of Ogg and the Gift of SussIn the Prison of the Squid Sorcerer (PDF)
: 12 Short Adventures for DCC!The God-Seed Awakens
: 3rd Level Adventure for DCC. New patron, new spells, lots of new monsters and the living weapons of the Empire of Thal! My Gamer Profile