After a series of surprising events, you find yourself in Wormwood Creek.
Explore the Town
Check the bookshelf in Mayor Doffish's house, then go around town checking bookshelves and opening chests.
Go to Church at Night
Go north to the inn and rest until night, then go to the church. Talk to Mayor Doffish to start the meeting. You'll find out about Greygnarl, the Hero of the Heavens, who is believed to be able to defeat the black dragon.
Find Wallace in Hope Springs
If you ask people outside, you'll find out that Wallace has run off to Hope Springs. Leave town and go north around the west side of the village. Head east across the bridge, then go north, and head northwest into a narrow passage. Make your way through the cave, and go south when you can, then look for a hole in the east wall. Check on it to climb in.
Open the red chest in here to get a Lucida Shard, then talk to Wallace. He will give you a clue for finding the way to Greygnarl.
Go outside and there will be a cutscene. You are asked to find an important item that was placed at the foot of the guardian statue in Wormwood Creek.
You can use Zoom to get back to the village quickly. The statue is to the left of the weapon shop. Check on it. You won't find what you're looking for, but Wallace will give you a hint.
Go into the church and check on the stone in the northeast corner. Investigate the gap in the stone to find the Serene Necklace.
Give Serena the Necklace
Go back to Hope Springs. Serena is standing in the same spot where you met her before. Talk to her. You will get a glimpse into the sad history of Serena and Corvus, and the Gittish Empire. In thanks for returning the necklace, she agrees to help you. She will depart for the Bowhole, where she will help you break the seal.
Go to the Bowhole
Exit Hope Springs and go south until you can cross the bridge to the west. From there, continue northwest. In Western Wormwood, you can see the Bowhole on the west side of the map.