After defeating Balgron the Fat, the party found a secret door in his bedchamber that led to an excavation site. The goblins and drakes within attacked and were quickly defeated, with Splug taking the opportunity to make his escape from the party. After recovering a bit more treasure, they pressed on through the Keep on the Shadowfell.
The group entered a cold, damp crypt-like area and were assaulted by some undead. They fought their way through to a chamber lined with sarcophagi that kept spitting out skeletons. When the sarcophagi finally exhausted themselves, the group examined two altars to Bahamut with inscriptions in Draconic. The party decided to rest once again outside the Keep to regain their strength.
Upon returning to Winterhaven, Ernest Padraig begged them to investigate the graveyard outside the city, which was rife with undead. The party was attacked there by the elf and her undead minions. They defeated her and found a note from Kalarel detailing a password to enter the next level of the dungeon.