After some exploration they found an alchemist of the Grey Ghosts and some duergar, which they captured. Having also found a shortcut back to the city, they brought the prisoners to the Keepers of the Flame. There they found out that the Keepers suspected the Grey Ghosts of having stolen a red dragon egg from Themberchaud, the dragon of the city, and were told to go back and look for it.
This time the group collected some of the mushrooms that could grow or shrink people, and used them to explore the narrower tunnels. That way they managed to sneak up on a group of enemies they hadn’t really been looking for: Cultists of Demogorgon, who were doing a ritual that apparently was responsible for the curse that made the giants sprout a second head and go rampant. They killed the cultists and reversed the ritual.
Finally they found the dragon egg with the leader of the Grey Ghosts near a strange obelisk, guarded by a spectator. The Grey Ghost turned out to be annoying due to his Blink spell. But in the end they killed him and his pet spectator, and got the red dragon egg. They found that the obelisk was a teleport out of the city, so if they had wanted they could have kept the egg and raised a dragon baby. But instead they brought the egg to the dragon (and not his keepers), who promptly destroyed the egg, as he suspected his keepers to use it to replace him.
So they left the city and traveled north towards Neverlight Grove. They only had two NPC companions left, who were myconids and wanted to go home. And Blingdenstone, the deep gnome city north of Neverlight Grove, was their best hope of finding a way back to the surface.
[Note that this journal entry is somewhat abbreviated, as there was a lot of dungeon exploring and fighting going on, which I didn’t want to recount in detail.]