You can get to the faerie realm and the ice caverns from here

You need to free Vermatrix Goldenhide, using the two parts of the key (repaired)

A primrose will open the passage to the faerie realm. Follow the faeries (blue bubbly things)

The magical flint is here, looks a lot like the rock in the dwarf smithy

There is a second stairway down to the lower FG

Spoilers

Press shift-F8 to display current location.

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- Start @(7,3)
- Down to Lower FG @(7,3)
- Down to Lower FG @(5,17)
- Teleporter to faerie realm @(29,10)
- Down to Ice Caverns @(5,27)
- Pit down to Lower FG @(17,25)

- Throg shaman @(10,6) attacks you. If you attack him, he drops a red feather, then disappears. You find him again @(6,32).
- Lady Dragon Vermatrix Goldenhide, leader of the great dragons. Chained @(7,8), @(19,11), @(21,16), use 2-part key to open, after the dwarf smith repairs it. She will leave some treasure when freed. (If you attack her, will she kill you?) NOTE: The dragon's body blocks off access from one half of this level to the other (she's big). You need to free her before you can finish the level.
- Skuz, the Sharga @(3,26). He joins the party.

- Manna circle @(27,15)
- Manna circle @(15,32)
- Magical flint @(27,12)
- Primroses @(26,20), put one on square @(28,10) to open secret door hiding the teleporter to the faerie realm.
- Half of a very sturdy key, in chest @(25,24)
- Rune scroll - Armor rune, in chest @(25,24)
- Rune scroll - Rune of Winds in chest @(17,17)
- Rune scroll - Shrink rune in chest @(17,17)
- Rune scroll - Improved heal in chest @(17,17)
- Rune scroll - Ball meta-rune on throg @(10,14)
- Rune scroll - Duration meta-rune on throg shaman @(6,32)
- Note to Gorda Karn @(12,29)