This is pure speculation on my part.
I think that "The Arm" is a group within the Ebon Mask that is loyal to the Teir'Dal Queen, that she uses for her own purposes (her own little black ops). The sources elude me, but the queen planned to kill the king and prince during the War of Fay. While the resources of the King were spent in Faydwer, the queen kept those loyal to her back in Neriak in order to execute her plans. As you have seen in the quest, the assassins of the arm used the confusion of the battle of the cauldron to mask the Queen's assassination of the Prince. I know the necromancer guild "The Dead" was favored by the queen, while "The spurned", the rest of the mages were loyal to the King. I think the mages of "The Spurned" were sent to positions where they would be of little direct help the King or Prince, while the necromancers were placed where the Queen could use them to facilitate her own agenda.