Windmill Basement Instance

Recommended Level 20+; Recommended group: 6 people, 1 main healer (possibly 1 secondary), 2 tanks (1 to offtank)

1) To start off, talk to an NPC called Uncle Kaga located near the Windmill in the Logar starting area. HE WILL NOT GIVE YOU A QUEST. This is a repeatable collection task therefore it doesn’t go into your journal, you just need to remember what you need to do.

2) If your crafting skill is high enough (anywhere from level 1 to 3, get it to 3 just to make sure) you can learn the recipes for the weapons and armor. They are the following:

With Blacksmithing you can make:
-Carlyre’s Ring,
-Carlow Saber (Sword),
-Heavenly Feather’s Auger (Staff),
-Solice’s Recurve Bow (Bow),
-Kayla’s Moon Silver Sword (Dagger)
-Refine Fire and Water Essences;

With Armorcrafting you can make:
-Yolta Leather Chest,
-Hochim Chain Chest,
-Ventis Cloth Crown,
-Yolta Leather Helm,
-Hochim Chain Helm,
-Low/Lesser/Medium Rune Power;

Tailoring:
Ventis Cloth Leggins,
Hochim Chain Leggins,
Yolta Leather Leggins,
Ventis Cloth Robe,
Ventis Cloth Boots
Low/Lesser/Medium Magic Element;

Alchemy:
Elemental Crystal;

3) To enter the Instance you need to go to either Dead tree Cave or Barren caves and kill a goblin named Golo. In both Caves he drops the same material – Essence of Dark Flame Vapor (this item is bound so everyone needs to grab a couple). Uncle Kaga needs this stone to convert it to Fire Essence Vapor Stone in order for you to enter the Instance.(Talk to him and ask about entering windmill, he will have an option to convert the stone) Vapor Stone is the key to enter and it lasts for 1 hour in your inventory.

4)After you enter the instance proceed to clear it. Mobs range in levels 14-17. After you get to the room with a huge box that is clickable/activated make sure everyone is out of the room before opening it. It’s a trap. When you open the box you get Kobold Crown Fragment and a bunch of mobs spawn. Kill and proceed…

Proceed on to the Boss (Hodu Hammerbreaker). You cant kill him the 1st time around. As soon as you get him down to about 30% he will disappear and tell you that you must find him again to really fight and kill him.
After you clear the instance and get to the room with the 2 chests, loot the chests and run back to a room with pillars (where you faced Kobold Champion mini-boss). There you will see spirit of a fallen hero. Talk to him. He will tell you how he tried defeating the boss but failed. As soon as he is done talking the first boss, Hodu appears.
*EDIT*
We are still not sure, but there are 3 endings to this:
1) you just kill Hodu and heal the spirit, spirit survives and u get double the boss drops from the spirit
2) a second boss will appear Kobold Bonebraker (also called Gerlios or something), kill both->get materials
3) you only fight and defeat Hodu and no other bonuses apply

After you defeat Hodu you will get Gem From Hammertooth Mask and some other boss drops(to be updated at a later date); Kobold Bonebreaker drops Smashed Water and Smashed Fire Essences.
**1802 PATCH UPDATE**
-the boss(es) now drop tier one set gear (lvl 15 one), so you dont really have to craft this, since it will eventually drop, you can just gather materials for upgeading

More on the crafting to be updated…

Thanks to Galphon and My guild "Rule34" for helping me do this and providing helpful information!