Ignore the Rot, you come across blood stones quite frequently. And, nearest to you,
Boreas' treasure room has one I think, otherwise that mage, what's his name, Maradona Madorana something, his 'office' in the cave. So you're not far from one.
There is one he can access right away, no fighting required.
use a shovel near the giant stone head to gain access to the prison. After you clear the minefield corridor (just blast it) and get into the prison proper, there is an iron maiden outside your cell. Dig your way out (or bribe the rat), then talk to the iron maiden to learn that a stars tone made it sentient. Attack and break it. Voila! Blood stone.