This is a great hook for a modern setting where magic is possible, but rare. I can see this mainly being used with GURPS and/or Hero system.
A new neighbor has moved in next door to the PCs (or one of the PCs if they live separately) and he’s a strange old man. He seems harmless, but strange noises and lights emanate from his house at all hours of the day and night. The sounds are not loud enough, nor are the lights bright enough to interrupt sleep, but they are still strange. A week or two after he moves in, the PCs encounter another neighbor who claims that the old man is Merlin from the Arthurian legends and has setup shop in this quiet area. The neighbor wants the man out of the area before knights questing for the Holy Grail, round tables or damsels in distress begin marauding through the streets. The friendly neighbor implores the PCs to do something about Merlin before bad things start to happen.
What really is going on in the old man’s house? Is he really Merlin? Is he casting magic, or just practicing his pyrotechnics and light shows? What will the PCs do about the goings-on in the house?