This sounds good; it would make for a fun quest, make your hero stronger, and could possibly lead to more hero development (after all, what happens when everyone's at level 60? There needs to more to do...)
And, dragging hero customization into this, completing this quest could allow you to have fancier abilities and/or equipment (once customization is in, obviously). It would be a transition from just a random noble to...something more.
This quest, by the way, should be given by somebody fancier than just some knight. The princess can give it for elves, a shaman can give it for orcs, and for humans...maybe even a wizard? Having the king do it dosen't sound as big of a deal. The quest giver needs to be somewhat mysterious; this is more than just a promotion, it's a transformation.
That was so funny, I laughed twice.