Reward: 450 Renown, 5000 Gold.
You have to take care of the bandits who threaten Knothole Glade. Once you're there, their chief will give you a ransom note for you to take inside. After a short cut-scene talk to the guard and make him open the gates. The bandits will start their attack. Kill the ones that run in your way (area attacks come in handy again, don't let anyone through!) and get in their encampment, killing everyone in your way. That's the easiest way to complete this quest, far easier than trying to defend the city while dwelling inside it.