Start by talking to Almera in her house next to Baxtorian Falls. She asks for help with her son, Hudon, as he is convinced there is treasure about, but he can't even swim. Exit through the back of the house and board the log raft along the river.
You will crash on a little island in the middle of the river. Talk to Hudon on the other side of the river. He won't listen to you, and believes that you will take the treasure for yourself.
Go south on the island, and use your rope on the rock on the next island. Then use your rope on the nearby dead tree.
Try entering the doorway into the River. The corridor will flood and push you into the river. You will wash ashore further down the river.
Go into the nearby building to the north and talk to Hadley. Ask about the elf king, Baxtorian. He will tell you that he made a home for his wife, Glarial, under the river, and made it so that only she could enter.
Go upstairs and the bookshelves to find a book on Baxtorian. It tells you that some gnomes took a pebble that allowed access to her tomb. Head to the Gnome Maze, and just outside the center of the maze, on the south side, is a ladder into a cave.
Head into the west part of the cave and try opening the gate on the north side. He accidentally locked himself in there and can't find the key. Go into the eastern chamber now. Search the crate marked below:
Go back to the gate and use the key on the door. Enter and talk to Golrie. You will look through his junk and find an old pebble. You will now have Glarial's pebble!
Note: Make sure ALL armour, runes, weapons, arrows, logs, bowstring, knives, etc. are banked! Food is allowed - and recommended!
Head to the tomb south of the dwarves camp (located east of Baxtorian falls).
Read Glarial's tombstone, then use the pebble on it. You will appear in a dungeon. Head west and search the chest to find Glarial's amulet. Then, head into the south part of the cave and search Glarial's tomb to find an urn of ashes.
Leave the tomb, and get your 6 earth, air, and water runes.
With the urn and amulet, return to Almera's house and board the raft behind it. Use your rope on the rock, then on the tree. Make sure Glarial's amulet is equipped then enter the doorway.
First enter the east room and search the northernmost crate to find a key. Now enter the west room, and use the key on the door to the north. Enter the second door. Use an air, earth, and water rune on each pillar.
Next take off Glarial's amulet and use it on her statute. The ground will raise up behind you. Use Glarial's urn on the Chalice of Eternity, and you will get the treasure.