An intresting idea... A dagger that is both enchanted and cursed. I make the distinction, as it is very well possible that the dagger can help you, it also may actualy be a curse to use it. Go to Comment
Oke, so I am "enlisted" in the city guard.... now what?
This might be a very decent way to start a adventure, but it is not a adventure by a long shot. It is not even a adventure hook.
With the comment of Agar, there is a start of a adventure hook though. Go to Comment
All the questions Agar raised have their validity, but just make this a very usable plot. The DM can simply fill out the answers and of course he will have to reduce the award for beating this demon. Remember that XP usualy depends on the CR.
On the other hand defeating the monster has great awards, as it will probably be very benificial in none XP areas. I can imagne the traders and the city people are gratefull, so they might be much more willing to help the PC's achieve other goals.
So it is not only a good way to make a high level monster more approachable for lower level characters, it is also a nice way to give players the opertunity to "solve" the problems they may have with some city (due to stupid moves made in the past.)
It might be a great way to give a group of novice players a second chance at getting something.