The gnome Psilo lives in his cave south of Cinfras pretty much under Aldorei. Asking the player for help will start the quest The Bigger Picture.
Finding Psilo's house is easy if you know where it is. Start at Cinfras' southern gate. Turn to the left and follow the path over the bridge, continuing going east. Enter the Aldorei Farm through the wooden gateway and follow the path to the south. Walk into the large cave and go on through the gap at the end. Follow the path under the red mushrooms till you reach the water. Turn right into the next cave. The path you will access has colored carpets on the bottom. Follow the trail to the right. This path describes an S-slope at first turning left, then turning right. At the end of the slope, you will reach some red mushroom on the path. Right of it is Psilo's house.