After traveling for four hours with no sign of the Shadows' trail, our heroes decide to head west toward the Dagger Hills. After reaching the hills, our heroes decide to head north, along the edge of the Dagger Hills, to try to pick up the Shadows' trail. Just when our heroes are about to turn around and head south, Tiron uses a Speak With Animals spell to ask a rabbit if he has seen signs of the Shadows or knows of the lost dwarven city. When this line of questioning proves futile, the same spell is used on a deer, with much more successful results. The deer knows of a trail which leads to a place where people were seen leaving with shiny dirt. Following the trail into the hills, our heroes find the entrance to a mine shaft, and enter it.
After making their way cautiously down the shaft, our heroes see the entrance to the lost city of Dylvwyllynn. Before they can enter the city, however, they are attacked by nine duergar, mounted upon giant spiders. After five duergar are killed, the remaining four retreat down the passage which leads to the city entrance. A well-placed fireball makes them four ex-duergar. As our heroes make their way down the passage, they are suddenly surrounded by twenty or so duergar. Dalin the Brave melds himself into the nearest wall, but our heroes are able to easily dispatch the duergar. A door on the left side of the passage is opened, revealing a room with a lever in it. Conventional wisdom somehow wins out and the lever is not pulled. A door off of this room reveals another room with yet another door. Delf opens the door and is promptly attacked by one of two sword spiders. This nearly kills him. Cel leaps into the room to defend Delf, but Tiron and Brau'ni manage to pull them out and shut the door before the spiders can attack again. Our heroes vote not to go back into the room, then notice Dalin is missing.
Back in the passage, our heroes finally enter the city and discover a huge statue honoring a dwarven god, facing south. They find Dalin in one of the passages which comes off the statue room and begin a methodical search for the Shards. Most of the old buildings found reveal nothing (although a twenty minute search of one floor results in the bounty of an ancient gold piece). Our heroes finally enter an area with old, dank, moldy vegetation in it. Brau'ni and Dalin (who are in the lead) breathe in some spores, which don't seem to affect Dalin. Brau'ni, however, goes stiff as a board and crashes to the ground, growing paler by the minute. After much discussion, Dalin casts a Cure Disease on him which purges the sickness from his system. After futile attempts to destroy the spores, our heroes agree to avoid this type of area. A little while later, noise, quite a bit of it, is heard coming from one of the buildings. Delf pokes his head around the corner and sees twenty lizard-faced creatures coming his way. Pressing up against the wall, our heroes hope the creatures will head the other way down the corridor...
Luck is with our heroes as the twenty creatures do indeed head the other way down the corridor. Just as the last of the creatures turns the corner, oblivious of our heroes, Dalin yells out, "Death to the defilers of the dwarven city!" and charges into the back of the unsuspecting creature. A fight ensues, with an impressive lightning bolt from Raphael putting a huge dent in the creatures' numbers. As the fight continues, Cel is able to telepathically read the surface thoughts of one of the creatures. "Why are you killing us? What did we ever do you?" are the two prevailing thoughts perceived by Cel. After killing all but three of the creatures, our heroes (?) let those three go, then notice Dalin is missing (again).
As the creatures run in terror from our heroes (no reason) they are confronted by Dalin, running towards them. They turn on their heels, terrified of the one who so brazenly attacked them. After our heroes let the frightened creatures pass, an out-of-breath Dalin meets them, yelling, "Get out of here! There's three guys with tentacles growing out of their heads coming this way!" Realizing these tentacle-headed beings are Mind Flayers, our heroes about-face, and head back up the corridor, hoping to avoid a confrontation with these things. Further searching of the dwarven city reveals two more statues, also facing south. Brau'ni and Dalin then round a corner, and are surprised by three Mind Flayers.
Brau'ni, Cel, Jordan, and Tiron fall victim to the Mind Flayers' psionic attack. Delf goes invisible, Raphael goes ethereal, and Dalin and Rolonda are able to withstand the attack. Delf pulls Cel out of the area of psionic attack, revives her, and takes one of the flayers out with a poisoned arrow. One of the two remaining flayers grabs hold of Jordan and carries him away. The first psionic attack wears off, releasing Brau'ni and Jordan. Brau'ni remains motionless and is able to get a back attack in on of the flayers before being overcome by their psionic attack once again. Rolonda stuns a flayer and a few minutes later, the other one. Our heroes dispatch the stunned flayers, revive Brau'ni, and set out in search of Jordan.
Jordan is located and our heroes camp for the night. When something is heard approaching the site, Raphael creates the illusion of a wall between our heroes and the noise, and the threat is no more. In the morning, our heroes decide there must be some significance to the fact the statues are facing south, and find their way back to the entrance to the city, to the first dwarven statue. After heading in a southerly direction for a while, our heroes meet up with a group of gnomes. After much discussion (Jordan speaks Gnome), our heroes agree to follow them back to their lair.
Met with initial trepidation, our heroes form an alliance with the gnomes. Jordan describes both of the Shards to the gnomes, who recognize the descriptions and know where they are. One in the possession of the drow, while the other lies of the bottom of a lake. Both are in Dylvwyllynn. Our heroes agree to help the gnomes trap a Beholder in exchange for help in retrieving the Shards.