Xan's quest involves his status of a moonblade wielder. He is honor-bound to protect and rescue all elves, and this quest gives him a chance to do as duty dictates, and step forward, or to do as reason bids, and to turn away. Xan must be in party to start, continue or complete the quest. The player can determine a lot in this encounter, but it is Xan who receives the reward or bear the penalty - and while his reward may be great, his punishment is also severe.
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Xan's quest starts in the Basilisk area, code FW3500. http://www.forgottenwars.com/bg1/ar3500.htm In the bottom left corner of the map, there are three merchants - Skodd, Gael, and Mazuri. They spawn only if Xan is already in party. Upon meeting the PC, they explain that their caravan was robbed, and they barely escaped becoming lawn ornaments. They seek only to be left in peace and to continue on their way.
The party has two options: attack them, or let them go. In the second case, if the area has already been cleared(Mutamin is dead), and the player has introduced himself or herself, the party receives +1 to reputation.
If the player attacks, six armed mercenaries spawn, and the battle begins. Merchants use nasty darts, and mercenaries - acid arrows, so players are better be prepared! After the battle, three unarmed elven women spawn.
If the player lets them leave, a deer("White Doe") appears, and heads straight to Xan. Xan suggests the party follows, and immediately, the party is transferred to FW3000 - the area north of FW3500, the one with the four Red Wizards, many spiders, ettercaps and traps.
Read more about this area here: http://www.forgottenwars.com/bg1/ar3000.htm
When the party arrives - straight to the bottom left corner of the map, - they find three familiar faces there: Skodd, Gael and Mazuri again. However, this time they are surrounded by six merchenaries, and behind them, three helpless women stand, ready to be sold as slaves in Calimshan.
Another option is available, if all three elves - Coran, Kivan and Xan - are in party. If the player is willing to trade, and Xan, Coran and Kivan are all in the party, Skodd proposes an exchange - three women for three men-bedslaves, if the men are to come willingly. Come they do - Xan, Coran and Kivan leave the party and drop their equipment, but once the women are behind PC, the three elves charge. PC has a choice - to join them in their attack, or to betray them, in which case all elves turn hostile. The women go hostile, as well.
If the violent solution has been chosen earlier, the battle is over, and all three women and Xan are alive, the women plead Xan to protect them. Xan agrees. The player can choose to keep the woman as booty, in which case the women, Coran, Kivan and Xan go hostile, let Xan accompany them, or assist Xan in his task.
However, if the player has chosen a nobler choice - to assist the women, and to accompany Xan, the player finds himself on the second floor of the Friendly Arm Inn - FW2302, a part of the Friendly Arm Inn area. Or, if the player has chosen to let Xan accompany the women on his own, Xan can now be found there.
The Friendly Arm Inn, FW2300 is located here: http:/www.forgottenwars.com/bg1/ar2300.htm
Finally, the reward - having saved the women, Xan has done his duty, and a good deed to boot. So, he is rewarded through his Moonblade: Xan receives 10000 of experience. This is received, if Xan has accompanied the women to Friendly Arm Inn.
However, if the player has convinced Xan to walk away, Xan has failed in his role of a moonblade wielder, and he has to face a reprimand from the Tel Seldarine themselves: a lightning strikes him down, and he loses 10000 experience(if he is already past 10000).
Both reward and the punishment are triggered several minutes after the quest is finished. There are no random chances.