So if any of you know, you can actually kill Olaf One-Eye. But how is this? I did it yes, but I don't understand why we actually fight him. He's in Sovngarde, and I assume he is a good person. Why would his soul (if it's already in Sovngarde) attack me? Why would he even attack? He's a good guy correct? Can someone please explain to me?

I always assumed the reason for any draugr activity was because the draugr-to-be were part of the dragon cult.

A loading screen says as much, but we see plenty of Draugr that seem to be people who were born long after the Dragon Cult (Olaf being one of them).

So, draugr come to life if they were in the Dragon Cult? But how? He killed a dragon.

Their body stays and eventually reanimates, but their soul goes to Sovngarde.

Olaf was Dragonborn right?

I doubt he was Dragonborn.

He supposedly shouted Numinex into submission, but just being able to use Shouts doesn't make a dragonborn. I don't think I saw anything in game that said he was.

He attacks you in Dead Men's Respite because you are aiding Svaknir in the duel against him. Remember how Olaf One-Eye had imprisoned Svaknir because he was afraid of being exposed as a fraud? Svaknir challenges the King in order to exact vengeance.

It seems to me that this quest is intended to be completed before going to Sovngarde.

The 'Olaf and the Dragon' mentions that he may have had the ability but just no one to use it on.

http://www.uesp.net/wiki/Skyrim:Olaf_and_the_Dragon

It doesn't mention where he learned the Thu'um if he wasn't Dragonborn.

But due to what the book says, I bet he's Dragonborn.

Eh, the only line that might lend itself to that interpretation, "Here again, the stories diverge. Many accounts hold that Olaf did not realize he possessed the power of Dragon-speech, while others suggest that he had long possessed this gift, but wished to test himself against the dragon in martial combat first", smacks of the ambiguity Bethesda loves.

I doubt Olaf was dragonborn.

It seems that anybody buried in the ancient tradition (ie, a crypt/Hall of the Dead) has a chance at being reanimated as a draugr. Olaf himself is a great contender for this interpretation, as he died long, long after the Dragon Cult's days.