  Lattice dynamics and magnetic excitations are investigated to elucidate the
origin of magneto-dielectric effects in the S=1/2 two-dimensional quantum spin
compound K$_2$V$_3$O$_8$. We find evidence for lattice instabilities at 110 K
and 60 K as optical phonon anomalies and a soft mode at 26 cm$^{-1}$ in A$_1$
symmetry. Two-magnon excitations in B$_1$ symmetry show an unconventional
double-peak structure and temperature dependence. This suggests the existence
of a split mode near the zone boundary caused by a mixing of spin and lattice
modes.
