Thanks for the questions.
Re: Arneson input. My source texts were previous incarnations of the City, including the campaign record of Kuntz, Gygax and Arneson. I was given generous amounts of freedom to 3.5-ify the original, with the goal of keeping it true to the original spirit of the game, while fresh and new to those that might have played it before.
Ultimately I suspect that my versions of both City and Temple are missing one aspect that was crucial to the originals: humor. The Old Ones took their games a lot less seriously than we do. Reading through some of Dave's memoirs is like flipping through a Xanth novel. Puns and in-jokes abound.
Re: Shrine of Axmouth. This was placed out of the 3.5 Blackmoor Campaign Setting source book (produced by Goodman Games and then by Code Monkey Publishing). It appears on the map because purists would note its absence, even though it has no relevance to the adventure.
What's the import of the Shine? I have my theories, but we'll both have to wait for the next Blackmoor installment to know for sure.
Thanks for the questions, and for not noting that the picture of the City is standing, while the map of the City shows it fallen down. *whistle*
I hope it is a thrilling for your PCs ... even if it is a bit out of the ordinary crawl.