Viyeldi is a spirit encountered during the Legends' Quest, when Nezikchened - disguised as Echned Zekin - asks you to kill him. When you first enter his room, Viyeldi pretends to be a hat on the ground until picked up. Upon beginning a conversation with him, he informs you of a different path you could take in the quest. You can choose to carry out Nezikchened's request, and kill Viyeldi using the Dark dagger that Echned Zekin gives you at the source of the holy water spring, or you could listen to him, and kill the warriors for the fragments of the Heart crystal to progress.
Killing Viyeldi, while quicker, results in a more difficult final fight, as you will have to defeat the three warriors San Tojalon, Irvig Senay, and Ranalph Devere alongside Nezikchened in the fight. You can avoid this if you listen to Viyeldi and give the dagger to Ungadulu instead, and kill the warriors. Ungadulu will also give you a Holy force card to use against Nezikchened and weaken him in the next two fights.
If you do kill Viyeldi with the dagger, then you can still give the glowing dagger to Ungadulu to receive the holy force card. Just remember that this route results in the three warriors appearing in the final battle. Whichever option you take, be prepared to fight the demon after this section of the quest. See the quest guide for more information.