Time has come to finally meet Thadon, ruler of Mania. His quest for you will be to retrieve a Chalice of Reversal. Talk to Wide-Eye, his argonian assistant. She'll tell you that the chalice can be found in Dunroot Burrow. Also, you'll know that in order to get inside, you'll have to eat some Felldew.
When you're at the spot, defeat an Elytra Hatchling and take Felldew from its body. Consume it and you'll be able to get inside the cave. The dungeon itself is very large, it has no less than 5 levels. You are temporarily addicted to Felldew, and if you don't eat new portions regularly, some of your stats will be lowered. You can tell that Elytra is holding some Felldew by the green glow around it.
On the last level of the dungeon you'll find some Felldew addicts. The chalice will be somewhere around their hangout. Leave this place using a shortcut, then go back to Thadon.
The Cold Flame of Agnon
Sheogorath wants you to light the great torch in favor of Mania or Dementia. Head for Cylarne. Talk to both sides of the conflict there: Dark Seducers (Dementia guards) and Golden Saints (Mania). The former reside outside the ruins, the latter dwell deep inside. You have to choose which side to support. You can scout the area for the Aureals (Mania), or lead them into a trap as told by the Mazken (Dementia). Do as you will, their forces are quite balanced so anyway you are the one who will make a difference here. When the battle is over, watch the victors' leader to sacrifice her life to extract the holy flame. Go outside and step into the fire marked on your map.
When you're back to New Sheoth, go to Sacellum Arden-Sul and talk to the priests in there. You have to choose which side you want to support. Your choice determines the reward that you get (a set of clothes).
If you support Dementia.
If you support Mania.
Ritual of Accession
Sheogorath orders you to take place of one of the dukes. You now have to make your choice - it will somehow affect the rest of the main quest, but the differences between the quests that follow are actually quite vague. Talk to both priests to know what's the ritual you have to perform, and then tell the Prince what you've decided.
Ritual of Mania
The Ritual of Mania sees you assassinating the duke by making him overdose a drug known as Greenmote. Go to Thadon's court and talk to Wide-Eye. Raise her disposition if you have to, and she'll share some secrets with you. First, every day around noon she has runs a special errand for the duke. Wait until 12 pm and follow her all the way to a secret Geenmote Silo.
You have to sneak to the silo on the right side of the map. If you are spotted, you'll be thrown out and have to try again. Watch out for the guards and for Wide-Eye herself. When you reach the storage room, grab two units of Greenmote and take your leave.
Wait until around 6 pm and sneak towards your map marker - you are to add Greenmote to the duke's dinner and wine. Obviously you can't get caught this time either.
When you finally succeed in poisoning the duke's dinner, visit him around 8 pm, when he's having the meal with his subordinates. Once he's dead, touch his body to get some blood. You might also want to grab his crown, as it's quite a cool item.
Go back to the temple and touch the altar to complete the ritual.
Ritual of Dementia
To become the duke of Dementia, you have to kill Lady Syl. Go to House of Dementia and talk to both Anya Herrick and Kithlan. Raise their disposition if they don't want to help you.
Anya agrees to distract some of the guards, and Kithlan gives you a key that opens all the doors around House of Dementia. Follow the map marker to find Syl's bedroom. Once you're there it turns out the duchess has escaped. Go back to the garden and touch the statue to the right of the bedroom door, to reveal an entrance.
First level of Xirethard isn't anything out of ordinary. Watch out for fireball-throwing traps along the walls. Later on, you'll have to battle some royal guards.
In the first room of Xirethard Depths, find a switch on one of the pillars to reveal a secret passage (screenshot below). Thanks to it, you can go around the blocked door. Reach the map marker - here is where you fight Syl. When you defeat her, grab her heart and her hammer. Go back to the temple to complete the ritual.
After a long scene it'll turn out that Thadon is betraying Sheogorath and joining the enemy. Your next task is to retake The Fringe.
Retaking the Fringe
Go to The Fringe. Around Passwall you'll see a unit of your guardians (Mazkens or Aureals, depending on your duke title). Talk to their leader and help them defeat the attackers. When she asks you whether you'd like to lead the defense yourself, just let her take care of that.
After defeating three waves of Knights of Order, you'll be sent on a quest to the nearby ruins of Xeddefen. Defeat the knights guarding the entrance and go inside, following the map marker. The very-hard door that you encounter can be opened with a key held by a nearby Priest of Order.
When you're on the lower level, you'll see Shelden - self-proclaimed mayor of Passwall. He'll ask you to escort him out of here. It doesn't matter if you agree, you don't get any reward for helping him anyway. A little bit ahead you'll see an Obelisk. In order to destroy it, you have to place 3 Hearts of Order in it. They can be obtained from dead Knights of Order. When you overload the obelisk, the place will start to collapse. Keep you chin up and look at the ceiling at all times. Don't run around blindly, but be careful not to get crushed by the falling rocks.
Talk to the guards' leader once more, then go back to Sheogorath. It's time to rebuild the Gatekeeeper.