The "Source" Lakeland NPCs are referring to is the First's equivalent body of water to our Silvertear Lake. It gets mentioned in a few places, but here's the only text I found about why it has that name.

Ambarth: The old elven legends have it that the Source was the first thing to take shape when this world was created. Gazing out over it, you can't help but be struck by how fleeting our own lives are, in the grand scheme of things.
High-strung Historian: Yes...yes! I could not agree more, my friend! For a layperson, you have a most remarkable eye! Although it has suffered some damage, Laxan Loft still stands strong as a singular specimen of this region's rich heritage and history! It is written in the histories that in the days of old, the elves held sway over all of Norvrandt. Yet they had no interest in establishing a nation, as it were, and thus were gradually driven from their homes by the other races. Realizing that they had to fight with their lives to defend their claim to the Source─their ancestral holy ground─with their lives, the once-scattered clans banded together, uniting under a single king. So was born the nation of Lakeland, and Laxan Loft flourished as the seat of its king. Shortly after, the elves allied with the Humes, and protected the Source from would-be invaders for years to come.
Events took a turn, however, some one hundred years ago. Elven dissidents from the old guard who sought to restore their race to its former glory banded together under the auspices of a figure known only as the Shadowkeeper, and a bloody revolution began... Laxan Loft, so proud and glorious, was bathed in fire and stained with blood, the beginning of the devastation that would continue with the Flood and beyond. But going back to the revolution, I came across a most fascinating theory. You see, one school of scholars posits that─ ...But forgive me. I tend to get carried away when the topic turns to history. Let us return to Fort Jobb that I might properly reward you for your assistance.
Hope this helps!