Queen's Domain patch 1.01.04 adds the previously missing Grave Knife throwing weapon to an open chest near the middle of the Tower of Knowledge. The Steam notes published on November 6 also announce changes to challenge tracking, an option to disable screen shake and a fix for restoring Steam Cloud saves after a crash.
Where to find the Grave Knife
Look for the open chest near the middle of the Tower of Knowledge. That is the location given in the official patch notes.
The Grave Knife is a throwing weapon. Its addition gives players looking for the previously missing item a specific chest to seek out in the tower.
Challenge tracking changes
The patch changes what counts toward several challenges. Certain weapons no longer count incorrectly toward Extensive Armaments; the notes do not name the weapons affected. The Ring of Wind also no longer counts incorrectly toward Versatile Volley.
For Concealed Passages, the correction goes in the other direction: the secret door that hid the Pandora Blade now counts toward the challenge. A hint has also been added to help players find the door. The notes do not specify where the door is or reveal the hint.

Puzzle and display options
The update adds an option to disable screen shake. It also adds icons to the status effects guide, making effects easier to identify visually. In lists, the left and right digital controls now scroll a full page at a time.
New options are intended to make certain late-game puzzles less frustrating. The patch notes do not explain how those options work or identify the puzzles they affect.
Steam Cloud and lockup fixes
The Steam Cloud fix addresses save restoration in a specific situation: switching devices after a crash. Players who move to another device after a crash are the ones affected by that correction; the notes do not establish that every synchronization issue has been resolved.
The patch also fixes a lockup that could occur when the character rested several times in a row with particular timing. Another correction addresses dialogue getting stuck with the merchant behind his counter.
The Tower of Knowledge is the place to look for the newly added Grave Knife. Players pursuing the affected challenges should also take the revised tracking into account, especially for the secret door associated with the Pandora Blade.
See also the Queen's Domain game page.