The party awakes the next morning in Wrafton's Inn to a gentle rain. They go downstairs and head outside, going to visit "Bairwin's Grand Shoppe," Winterhaven's general store for supplies. When they arrive, they purchase some basic supplies, Typhus again attempts to sell the dragon skull he retrieved from the burial site the day before. Unlike Valthrun and Thair Coalstriker, however, Bairwin seems interested. He is not inclined to purchase it, but will offer it in trade for an item he's been trying to get rid of. Typhus indicates that he prefers monetary payment, but agrees, and Bairwin moves slowly into the back room of his shop, where he spends an incredible amount of time rummaging.
When he emerges, he is carrying a bedroll. Almost immediately, Typhus asks if he has anything else to offer, and the aging, slightly senile Bairwin sets the bedroll down on the counter again and departs once more for an unnecessarily long trip to the back room. While he is gone, Morgue seizes the opportunity and takes the bedroll, stuffing it hastily in his bag. Bairwin returns with what he claims is a "bag of wondrous powder;" Typhus accepts this in trade, and hands him the hefty dragon skull in exchange. He also purchases some rudimentary components for magical rituals - precisely 25 gold pieces worth, though he initially attempts to sell the same amount for 50 gold. The streetwise Morgue and the ever-suspicious Zil'dejin catch on to this quickly, and insist he purchases the goods at their real value. He does so, and the three leave the shop to meet the rest of the party, waiting outside.
They pay a quick visit to the smithy, apparently looking for magical items, where an exasperated Thair Coalstriker shoos them away again. After this, they decide to visit Valthrun the Prescient to see if he has finished analyzing the rib yet. They arrive at his tower, and knock on his door again. After some time, he comes down, opens the door, and the party asks him if he has finished. He tells them somewhat evasively that he hasn't had time yet, and tells them that he hears Lord Padraig, the lord of Winterhaven, has been looking for a group to help him with a security issue. He tells the party to look into this and closes his door again. They attempt to knock on his door once more, but to no avail: he does not answer. They eventually decide to visit Padraig. At the closed gate to the inner court of Winterhaven, Morgue uses an elaborate explanation of his purpose to give himself an air of intrigue and mystery, and the fascinated guards let him in. They ask a guard which of the three buildings to visit, and go to see Padraig (after first dealing with the servant Samson), who tells them of the kobold problem that Winterhaven has been experiencing. He informs them that he has located their lair, and asks them if they will help for a small reward. The party agrees, and departs for the nearby waterfall, where Padraig indicates the kobold lair is hidden.
Outside the waterfall, they encounter a large group of kobolds gathered around an old magic circle. The party decides they must be in the midst of some ritual, and attempts to attack. Morgue moves first, but a failed attempt at an assault leads the party to be identified, and the kobolds are alerted. The six then engage them in battle, and eventually cuts them all down, but one is able to escape behind the waterfall. They pursue.
When they arrive inside, they find the kobolds within already alerted to their presence by the one that had fled from outside. Bottlenecked in the small entrance, they attempt to engage the kobolds in combat. As they near the end of the first wave, a waiting group of ambushers on the ground above the cave drops down, and an imposing presence enters from further within the cave. The kobolds are apparently obedient to the creature, who the party believes is the same Ironteeth mentioned in the note they discovered in Szartharrax's lair. They do not recognize the creature, who has a large head with two mouths, no neck, and four arms - each of which is helping to hold one of two battle axes. They are then assailed by this new group.
The six are at first surpressed. The self-sacrificing Mikhal is the first to fall, who attempts to heal and defend his companions but collapses in the far end of the cave to the onslaught. Morgue attempts to buy the party some time and hold Ironteeth back, and moves to attack him, but is struck down by his axes and bit by his crushing metal teeth and falls unconscious on the ground. Typhus, pushed back into a corner by a group of minions in the first wave, is the next to fall after taking out some kobolds with his magic, though he is able to recover after some time. Ironteeth continues advancing, and Tam'elanath steps in, first firing arrows at the attacking kobolds to kill some, and then finally attacking Ironteeth himself, first with his bow, and then by kicking over a brazier in hopes of igniting him. This attempt is successful, and Ironteeth is severely burned, but he proceeds to take out his anger on Tam'elanath. Lythanis, who to this point had been on the edges of combat assisting with psionic abilities, now finds himself up close to Ironteeth, and attacks, but is soon struck down as well. Typhus stabilizes Mikhal with the magic powder he traded from Bairwin earlier (identified as Woundstitch Powder) and moves to do the same to Tam'elanath and Lythanis, expending the powder completely. Zil'dejin, who had been around a corner, arrives to assist, and is able to get Morgue back on his feet. Ironteeth is able to fall the weakened Tam'elanath again and Typhus as well, but by this time the five standing have done enough damage. The finishing blow is dealt, and Ironteeth collapses. The party takes a moment to rest and help Mikhal recover, and then they search the cave for loot.
They find a note on Ironteeth, written in Goblin, and further within the cave they find some slightly magic gloves (Burglar's gloves, taken by Morgue, who else?), a set of magic armor (+1 Dwarven chainmail, taken by Zil'dejin) and a dark-colored flask scribed with runes, which Typhus identifies as the darkly arcane Prison of Salzacas, though he can't quite recall where he knows this information from. Tam'elanath cautiously takes the item, and the greedy but slightly misguided Typhus first steals all the iron braziers in the cavern, using a Tenser's Floating Disk ritual to lift them, then takes an armful of humanoid skulls from remains in the cave. Their task complete, the six return to Winterhaven.