No no! You dont need to give the key to him. Otherwise, you can not pass a mission. You need to use this key near magic door on paddock. Click on key, then go into his home after a little talk, take lighter in nightstand, open the cellar using use ability near it, go into cellar, find in the crate dynamite, and in the end go to cliff and chat use lighter on dynamite. Then go into glowing zone.