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Go southwest and into the dungeon (you'll know it's the right dungeon if, when entering it, "VD:1" is displayed to the right of the bottom display, directly left of your speed).
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After this, you can follow the village elder or the druid's words for what to do next. If you really want to be a goody-goody, talk to the tiny girl; but keep in mind her quest is difficult and frequently a quick death for inexperienced players. If you are not feeling ready to head east and look for the place the elder or druid told you about yet, you can head south, then west and into a tiny, strangely distorted cave. But be careful not to wander too deep. After you've gained a couple more experience levels, head east.