The Lost Blacksmith

Requirements: level 40
Required items: bowman's switch key
Be prepared to face: Composite Bowman
Rewards: 10,000 gold pieces, composite bow, light gilded platebody, 50,000 experience points

Spoiler

Start your mission from Ellaria's Deposit, follow map path and take a boat to Gulshan Village.

Find Terrowin ...

and ask with him about quest:
Player: Hello
Terrowin: Howdy, Player!
Player: Quest
Terrowin: The blacksmith of Gulshan Village has been gone for who knows how long! If you figure out where he has gone, please let me know!
After conversation with Terrowin, visit Arthur ...

and ask him about blacksmith:
Player: Hello
Arthur: Hello, wanderer!
Player: Blacksmith
Arthur: Where the blacksmith is? Honestly, I have no idea, but I would ask Graham, he overhears a lot in his tavern.
It is time to visit Graham. So, back to Ellaria, take a boat to Culthan Ruins, and then follow map directions.

Once you reach Graham's Tavern talk with owner in this manner:
Player: Hello
Graham: Greetings, traveller! Need food?
Player: Blacksmith
Graham: Yeah, he was here quite some time ago. Said he was about to retire, away from all the lousy customers he used to have.
Graham: I think he built his house somewhere near here, although he seemed quite keen on making sure intruders stay away.
Retired blacksmith lives nearby, in house at small island north of tavern.

Unfortunately, access to his house is locked.

To unlock passage, you must pull down two levers. Map are showing location of both levers - first is hidden in hole, second is available at small hill.

Once you use both levers secret passage will appear.

Enter the house of retired blacksmith, and ask him about his retirement.
Player: Hello
Lethold: Huh! How did you get here?
Player: Retired
Lethold: Exactly, retired! I'll give you this old piece I forged for someone ages ago if you just promise to leave me alone.
By talking with him you will receive bowman's switch key.

Finally, it is time for rewards. So, back to Ellaria, and then follow map pathes.

After killing few composite bowmans, you will find locked passage. Pull down empty switch - only bowman's switch key fits here.

By this manner obstacle will disappear. Go down. Beware! There are 3 composite bowmans (it could be problem for alone mage). Once you kill all opponents, get reward from chest.

Back to Ellaria, take a boat to Gulshan Village and visit Terrowin once again. Talk with him in this manner:
Player: Hello
Terrowin: Howdy, Player!
Player: Retired
Terrowin: He's retired? The old man could've just told us! Thank you for solving the little mystery, though.