How to unlock: talk to Masca at the Temple of Abydon (M1,3).
While at the Temple of Abydon (M1,3), you will encounter an acolyte, Masca. During the conversation, she will ask for your help with forging a sword. You will have to bless the hammer that she will use to perform an ancient rite.
To do this, you need to leave White March and go to Stagmire, and more precisely to First Fires in Defiance Bay. Find the Crucible Keep in the eastern part of the location and enter. The chapel that you are looking for is in the eastern part of the complex. When you find the altar, just click on the statue in the center to bless the hammer.
Now, you need to visit one more place in Stagmire - Magran's Fork. This time, you are looking for the shrine of Magran. You will find it, more or less, in the center of the location. It's the same place where Durance joined your party. Click on the shrine and place the hammer. Unfortunately, this time it is not going to be that easy. If you are not a follower of Magran, you will have to fight several blights of fire and a single adult drake.
After the fight, return to Stalwart Village, to Temple of Abydon (M1,3), and talk to Masca. During the conversation, you will be given several options to choose from. However, regardless of what you decide, you will be rewarded with The Unlabored Blade, i.e. a very good dagger that you can bind to one of your characters. You will be able to decide whether Masca remains at the temple or leaves it. Only if she stays, will your reputation in the village rise.