There have been a number of rumors circulating about the town of Theid—suspicious figures, strange magical energy, and people going missing. Sentinel and his travel partner, Xelvan, decide to go check it out. They find themselves deep within the woods, when all of sudden a large patch of colored lights appear overhead. They become enthralled with the lights and both pass out to awake hours later in a dark jail cell.
They are met by three other adventurers, Flint Gemhide, Varis Blackhart, and The Alabastard, who all fell victim to the same hypnotic spell. The five quickly agree to work together to escape from their prison and find the source of the strange magical energy. Sentinel and Varis overwhelm the two patrolling guards with brute force, while the rest of the team breaks away to gather the team's equipment. The party escapes the dungeon to be greeted by a band of bugbears, who have ransacked the cabin holding them captive. The group quickly dispatches the bugbears and escapes to the nearby town of Theid.
The group arrives at the front gate to Thied, which is manned by two guards. Flint and Sentinel attempt to communicate with the guards and plead them to allow entry, but the guards show no sign of acknowledgement and instead draw their weapons. Varis and Xelvan begin fighting back, but Flint quickly intervenes. He detects a strong presence of evil magic, and believes that the guards might be under some sort of magical control. He convinces the rest of the group to take the guards out non-lethally. Meanwhile, Xelvan uses magic to teleport across the other side of the gate and opens it for the rest of the team.
While inside the city gates, Xelvan notices a mob of villagers huddled together in the pub near the town entrance. The mob starts shuffling toward him, in the same hypnotic manner as the guards they encountered outside. Alabastard feels a sudden surge of magical energy in the direction of two houses toward the far side of the town. He leads the team to a cottage and finds a small Dwarven woman.
Flint uses their shared ancestry to forge a connection with the woman, and is able to break the spell controlling her. Once awaken, she explains that an evil illusionist named Kal Durand has taken control of the town and villagers, and has holed himself up in a manor in the outskirts of town. She also mentions remembering seeing odd creatures going in and out of the his house across the road. The group walks over to Kal's house to see a giant red dragon sitting right inside the house.
Varis charges forth and shoots an arrow right at the dragon. He watches as the arrows fly right between the dragon's eyes and passes right through it, dissipating the illusion. The team searches the house and finds a glowing orb connected to a staff. Xelvan picks up the staff and starts showing signs of madness. Sentinel's protective instincts kick in as he knocks the staff out of Xelvan's hands, shattering the orb. The hypnotic spell on the town is broken, and the villagers begin coming to. The team goes back outside to find a bunch of groggy villagers mulling around in a state of confusion. It's made clear that their problems won't end until Kal is taken care of, so the group decides to go to the manor to confront him.
They approach the manor and walk right through the front door. The interior is adorned with hundreds of gold decoration, and treasures displayed throughout. Directly in front of them is an ornate rug lying in front of a large staircase leading up to a balcony. Flint starts walking toward the back of the room as he falls straight through the rug illusion and lands in the basement. He looks up and is ambushed by three ambling scarecrows. Sentinel jumps down to help while Alabastard, Varis, and Xelvan shoot from above. The spellcasters exploit the scarecrows' weakness toward fire and quickly eliminate the creatures before any damage is done. Flint and Sentinel check out the rest of the area and find a side room containing three treasures and some gold pieces.
The group reconvenes back at the entrance of the manor as they investigate the remaining rooms. They come across what looks like a guest room, complete with five beds. They move on to the library and run into a displacer beast. Flint acts quickly by enfeebling the beast with magic, thereby negating its phasing power. The group eventually takes the monster out and heads upstairs, led by Sentinel. Once upstairs, Sentinel turns the corner to enter the parlor room, where he is met face-to-face with a giant lamia.
Xelvan charges from right behind Sentinel and fires a set of supercharged magic missiles at the lamia. The lamia slashes back at Xelvan in retaliation and does mortal damage, nearly killing him. Flint brings Xelvan back to life with a healing spell while Varis and Alabastard run around from behind to finish the beast. After a few well-timed arrows and an eldritch blast, the two take down the lamia, and the group continues to search through the manor.
Sentinel heads back to the main balcony area and dispels the illusory wall hiding the manor's elaborate ballroom. Standing by the far side of the room on a slightly elevated stage is Kal Durand, staring confidently back at the group. Varis leaps into action and fires an arrow at Kal, right as the image of the illusionist disappears. Kal's figure reappears across the room seemingly without a scratch. As Sentinel charges toward Kal, the clear image of the illusionist begins to blur. Sentinel sees past the double image and strikes Kal, angering him. The illusionist shifts focus to Sentinel and places him in a dream state, ready to evoke a terrifying nightmare. Varis takes a beat to investigate the rest of the room and notices a glowing orb places on top of the stage. He runs over to grab the staff and shatters it. Now without his extra font of power, Kal loses his mental grasp on Sentinel, and Alabastard and Xelvan are able to better focus their magical attacks toward him. In one last-ditch effort, Kal starts conjuring the same pattern of hypnotic lights that originally tricked the group back in the woods. His efforts are cut short, as the group resists the lights' power. Flint delivers a mortal blow to Kal, sending him to his knees.
Kal, on the verge of death, starts pleading for mercy. He explains that his actions were not his own, and that once the orb was shattered he could finally start seeing things clearly again. He vowed to help repair the town, in an attempt to repent for his crimes. The party escorts him out of the manor and into the town's custody. As they head out, they realize that the elaborate decoration and gaudy trinkets adorning the walls were all part of the illusion, and that the manor was really an old, abandoned building. Xelvan was especially disappointed to find the pile of priceless treasures he'd collected had turned to sand inside his bag.
The group succeeds in saving Theid and receives a summons from the office of the Magistrate of Cardia, one of the major cities of the Gravenholm Confederacy. Together, they set out to uncover the mystery behind Durand's mysterious rise to power.