Talk to the dude in the general store, and take the haunted farm quest. Then go talk to Balthas the tanner, and ask about his problem. Talk to the dog. Click on the boards on the well, then use a rope on the well. Go down on the rope.
Nothing much to do here, except see the cave-in. There's Johnny's BB
gun down here, but it's a crappy weapon. You can get the ammo out of
it, though, for later when you get the LE BB gun, which rocks. I
can't remember where I got that one from, though. Go back up. Leave
and go to the haunted farm (via the world map). Examine the corpses:
they're fake. Either talk to the guards outside, if they're present,
or go fall through the floor in the house (one of those rugs is over a
hole in the floor.) Let yourself be taken to Vegeir.
Talk to him, ask a few questions, such as what's with the fake corpses
and why don't they do it themselves. (I think that's inconsistent:
their guards had no problem staying outside AND in daylight.) Accept
the quest. Before you leave, go north. The dog will run to a little
kid. Talk to the kid. His father is Balthas the tanner, remember?
Unfortunately, you must talk to Vegeir before you can take the kid,
and you can't before solving the conflict with Modoc.
Go back to Modoc, and talk to the dude in the shop. Tell him the
corpses are fake. He'll give you one month to find Karl, the missing
farmer. No time to lose, go to the Den.