You receive the quest during the conversation with Renengilda (M1,7) in Stalwart village. It should happen during another quest - Durgan's battery. You will have to find Galvino - an animant that is living in the shadow of the dwarven fortress since years. He can help you get inside.
To find Galvino, you must go to Durgan's battery, a location found north from Stalwart village. There, follow the road north until you reach Galvino's cabin (M4,2). Enter the building and use the hatch in the room on the right. You will enter a pretty large dungeon. Your task is to reach Galvino's office (M8,5). Since it won't be easy, you should use the map found in this guide that will help you in avoiding all the traps and finding the key (M8,1).
Once you enter the room, Galvino will talk to you. A pretty long conversation is ahead of you. No matter what dialogue options you select, it should more or less go in the same way and with same consequences. First you will learn how to get into the dwarven stronghold, then you will have an opportunity to make Devil of Caroc join your party, finally you will receive a side quest - The fisherman's penance.
Galvino will give you a special item that will help you find a person related to dwarf's ghost from the Durgan battery. That person is in Stalwart village. The ghost will tell you the incantation required for opening the door.
After acquiring the device, travel to Stalwart Village. There you will have to find the appropriate dwarf, Taena, who can be found in her house (M1,8). The easiest way is to provoke a fight with her - the encounter itself is trivial, you should have no problems at all. The quest will be finished.
If you don't want to kill Taena, you need to have the Resolve attribute on the 17th level, or the Intelligence on the 16th. Before you decide to start the conversation, it's a good idea to save the game, as the conversation itself has a lot of different paths and you may accidentally provoke a fight - if that happens, load the game and try again.