The fight here is considerably easier than it could be- Svaknir fights with you, using his sword, and while he can damage the draugr, nothing at all can injure him. Spells and ranged weapons pass through him, and the only thing melee attacks can do is make him stagger (and only melee attacks from the undead, at that). You can easily turn this into a massive advantage for you- he doesn’t care if you cast spells or shoot arrows through him, and he gladly attracts the attention of the draugr in melee.
Once the dead stop rising from the double-ring of seats, Svaknir advances up the stairs one layer and calls out another challenge to the dead King Olaf. Again he is answered by undead, the four Draugr Scourges rising to the attack one by one. Keep on as you have been, and Svaknir will continue helping you to deal with these. If you are staying back, you will want to stay out from behind him- the Scourges will often use the Thu’um of Force to try and blow him back, and if you’re standing behind the ghost you -will- get hit with it and painfully knocked around.
Last of all is King Olaf, who finally answers Svaknir’s third challenge by rising from his coffin, furious at the impetuousness of the bard. While King Olaf is quite powerful and durable, he has no Shouts nor ranged attacks of any sort, so you can let Svaknir tie him up in melee as long as you like.
The thing to keep in mind while fighting alongside (or behind) Svaknir is that while he does injure the draugr with his sword, if one of them falls to its knee from injury he will immediately begin ignoring it in favor of any still-standing draugr. Actually re-slaying the animate dead is up to you entirely. As an additional side-note, shooting enchanted arrows through Svaknir at things via a bow enchantment will often wind up hitting him with the enchantment effect, rather than the thing behind him. While he will always succeed at resisting the enchantment, it prevents the effect from striking whatever you were shooting at, so make sure to attack from the sides or behind the enemy if you’re using an enchanted bow.
Once the king is dead again, Svaknir stops, walks to the iron door at the side, and then stands there playing his lute in silence for a few seconds- after which he disappears.
Loot all the dead here, and you can come up with a number of bits of equipment and gold- and the key to the treasury from King Olaf’s corpse. Also, make sure you don’t forget the Word Wall, which holds one of the words of the Whirlwind Sprint Thu’um, a useful Shout for bridging gaps or traveling short distances very quickly.