Near the main gate, you'll see a small gathering of citizens listening to Formosa, a comely half-elf. Interrupt the girl and she'll tell you about Meldanen, a local resident who is hoarding grain, among his more frightening crimes. The part about collecting "magical abominations" may be a lead as well. Accept Formosa's quest to kill him and get his warehouse key--there are numerous resolutions to this story, but you won't need to decide on a course of action until you actually meet Meldanen.
Meldanen's Estate (Gate)
Now we start investigating Meldanen. There are two routes into his estate. The quickest is the front door, which you can access by killing his guards or by bribing Orrean (half-elves can get a discount on the bribe). There are cheaper and/or less violent means as well, and speaking with Orrean outside the estate will give you a vague clue that relates to Meldanen's love life.
Find Milly, the laundry woman who wanders around the northwestern area of the district. She'll tell you about her past relationship with Meldanen and that he set up a portal in her house presumably to make booty calls all the easier. She'll give you her key, and you'll find the portal behind the jeweled door in her house.
A-Portal from Milly's|
D-To Meldanen's Sanctum
No matter how you get into the estate, you'll need to deal with Grommin, the 5th-level barbarian half-orc that guards the front door. You can convince him that you are a guest or provoke him to attack you. Past Grommin you'll find the prison cells, where Meldanen keeps his kidnapped victims. Samuel is here, and you can free him to complete the Samuel's Rescue quest from Thurin at the Board Laid Bare.
Before descending to the lower level, explore the lab (guarded by a 4th-level wizard) at the west end of the south hallway. It's stocked with some decent potions. Meldanen's apprentice, an 8th-level sorcerer, guards the stairs down.
A-To Meldanen's Estate|
There are two paths through the sanctum, and both are well guarded and have decent loot. You'll also encounter another of Meldanen's apprentices (another 8th-level sorcerer). Speak to the dryad in the cell, and Meldanen will appear. Fight him until he surrenders, and you'll be given several choices. You can kill him, let him go (but take his tooth for Formosa), or agree to kill Formosa for a bigger reward. Be sure to get the warehouse key as part of the deal. Whichever route you take, free the dryad and she'll give you a lock of her hair.
Return to Formosa and give her the tooth and the key (or, if you're evil, kill her). She'll reward you and then be gone in 60 seconds to raid the tomblike warehouse, which you can explore once she's inside. Finally, deliver the dryad's lock of hair to Aribeth.