Lighting the Chalice
You can begin this quest by talking to a lady in the southwestern part of Castle Muldivadd.
She will ask you to light a chalice in the Multiple Mountains.
The chalice can be found is the western part of the mountains, on your way to the desert.
Simply cast a fire spell.
As long as your character is in contact with the chalice, it will light.
Report your success back to the lady at the castle.
The Explorer's Rucksack
If you return to the lit chalice after speaking with the lady at the castle, you'll notice someone there.
They will tell you that a Mountain Mage stole their rucksack.
Go fight mages in the mountians until one of them drops a ruck sack.
(NOTE: The drop rate is about 33%.)
Return the rucksack to the explorer for 200 gold and added fame.
That's it! You've completed the Mountain Chalice quest.