"The sun begins to set. A big burly blacksmith... and a small, slender... and equally pent-up companion. intermingling within the warm confines of the forge." Do someone know how to unlock this one? I have no more idea to try it.
After completing the quest at the mines with the bats... go and talk to the blacksmith before you end the day. He'll be outside his forge, just below the Inn. Let the scene play out, then go take a look at his house...