The small stones are found near the mines, north-east of the village. You'll find Louc's chest up there.
Find the chest
Go to the mine at [9,-23] and walk through the mine until you find an uninhabited room. Attempt to open the chest and you'll be attacked by Fuu Yie after a quick cutscene. She is level 20 and it's fairly tough (hits 20+ when she attacks) for low level characters, and she turns invisible. Don't despair if you don't succeed right away. As of 2.0, friends can join you in your fight after you choose the quest, so you can always bring help.