Easiest way to find, find the main cave exit to under the ragnorak castle, go down as deep as the massive cave goes. Add generators and lights down there took me about 3 hours to do. But they're down there for sure. Glow sticks tend to work somtimes for drawing them out
Get a fire wyvern and get 30k health incase something else fights you along the way. Then you should be able to easily kill it (I did this and killed it). The Deathworm can also be found on the map Ragnarok in the desert which is the bottom right corner when looking at the map. I found it roughly in the middle of the desert.