The Corrupted Magister's Staff is discovered in the Mages' Chest in Return to Ostagar (Quest). The Key to Mages' Chest to open it can be obtained during The Hungry Deserter. If it was during that quest you will be unable to open the chest. If the Hungry deserter wasn't completed, the chest key can be found on the charred corpse of the prisoner by the fallen cages near where the Warden re-enters Ostagar on their return.
Notes
It is not possible to upgrade the staff through the usual means of selling and repurchasing.- If you are unable to open the chest containing the staff because the key has already been used previously, you can download this mod as a means to acquire the key once more.