Nirwell was indeed named after Nirwella. As for the two crystals, the Red Gem was sealed with Imagination, thus acquiring an external light blue colour and was later put on top of a scepter. It was given to the Britayans to keep (or hidden in a Britayan location). Hundreds of years later, the Britayans still thought it evil, but they'd forgotten why and hence its protection was not as good as it used to be, allowing Baron Typhonus to take it and connect to it. Thus, Malfros was able to posses Typhonus's body and use him and his Imagination to create the Maelstrom. So, your suspicions were correct, though I couldn't say it immediately in the story. As for the other crystal, it might see the light of day one day (but what if it's a night?).
@N_B: I am intrigued to hear you are a Dwarf.