The building is located in Moonbrook around southern Westfall and looks somewhat like a town hall. There is a cemetery behind it. It is the building in north-westernmost Moonbrook.
In the quest The Legend of Stalvan, one is sent to the schoolhouse to find a letter in a footlocker that appears in the main room of the ground floor, just short of the elevated part.
A Forlorn Spirit appears after accepting  The Legend of Stalvan (3). She casts polymorph and turns your character into a sheep. She may also cast Curse of Stalvan.