He is currently "tied up" kneeling on the floor of the lesser audiance chamber in the Baroness' manor. He can, however, get free anytime he chooses. However, his gear is currently wrapped in a bag and dumped in front of him. He's posing as a slave in order to get close to the Baroness with the rest of his group. They are to capture, not kill her, and destroy a idol of Orcus that keeps her soul bound to him. You're surrounded by living and undead guards at the moment, and you're guessing you'll have an audience with the baroness soon.
Sebastion, on the other hand, is posing as one of the captors, with Lyssia and Derrik. However, his paladin mount, Aerofax, is the one the Slavemaster is talking about having her wings cut off. The Slavemaster assumed she was Staeven's mount because an "evil knight" like Sebastion (he wears scary black armor), obviously wouldn't ride a half-celesital horse.
Sebastion, on the other hand, is posing as one of the captors, with Lyssia and Derrik. However, his paladin mount, Aerofax, is the one the Slavemaster is talking about having her wings cut off. The Slavemaster assumed she was Staeven's mount because an "evil knight" like Sebastion (he wears scary black armor), obviously wouldn't ride a half-celesital horse.