Act 1, Scene 4.2: Path forward and to the left--Kelpie

The path leads through an area of dense, moldy undergrowth, in a forest of sick, droopy spruce and 5' high black-headed mushrooms. Some of the forest has been felled, leaving behind piles of bracken and pieces of fungus lying about.
There is still a faint trail leading back through the woods; it's difficult to keep, seeming to end completely in places and then come back into view. [TRACK (survival) DC18 to find the path.]
The path apparently goes on for a mile or two, through this same strange forest, before opening out into a more open space, a space as if it has been cleared out, all the brush pushed to the side, and a modest hill rising up from the forest floor.
What's more, there is a cave here, dug into the side of the hill.

[DC15 there is running water and dripping sounds from within.]. Before too long you hear noises of someone coming to the entrance from within.
Sure enough, there is a small man, like a gnome except with very long and pointed ears, and a blue light in his eyes. He smiles merrily and speaks to you [in Sylvan]:


"Ah at last someone arrives. We've been waiting for heroes to come along and save us from the grey ones, the Skulks. They've caused all of this, and so many friends have left to find other places to live. But I'm staying to the very end..."
"Named" Daribus Dobabble.
"Please do come in; it's a bit of a mess in here, but there's fresh water to drink, and shelter from the ooze, and I can give you my wand, to speed your success."
THE LITTLE MAN IS A KELPIE, will transform when the heroes come into his lair
In his lair also is treasure, see "ACT 3, left to be handed out"
Act 3, Scene 5... Up into the Icky Valley