As for Queen Karnak - or - Queen OF Karnak, it's a recurring issue with older games to not give side characters proper names.

The queen refused to turn off the crystal amplifier, because somehow it made her kingdom's blacksmith more efficient. She simply wanted the "prosperity" to continue. But that kind of implies they were impoverished without the crystal. Which might have been the work of another fiend.

It's hard to say if the Ancient Library is within Karnak's borders. I would assume so. The library is also where Ifrit was sealed. Perhaps Karnak needed to amplify the fire crystal simply because Ifrit was missing.