Skull Fragments are a binding material that can be farmed off the skeleton monsters found in Balandor Underground when you go to acquire the third Insignia. They can be used along with a Knightlord Sword +5 to create a Holy Saber that comes with the added effect of Undead Killer.
A helpful hint to kill Skeletons is to first knock them off balance with attacks. They will not sustain any damage until you do so. Then, use either a Holy type elemental attack, or use a lunging - type attack, a good example would be Sword and Shield class's Lunging Strike.