Before the High Detail update, this NPC looked like he was "net fishing with a shirt", as the animation for net fishing was used.
Tegid may be a reference to the legendary King Arthur - the lake in which he washes the clothes is Lake Crystalmere, the home of the Lady of the Lake, who has strong ties with the legend. When Arthur rides to his final confrontation leading to his death, he sees an elf washing blood-stained clothes.
Tegid is a lake in mid Wales, occupied by a legendary monster named Tegi. Tegid is washing his dirty laundry in a lake.