First, pls don't say anything about me reviving such an old thread. Some people are just too old and busy to play some games when they came out. I only bought KB 4-5 years back (the Platinum directly) and only found time to install and play The Legend about 2 years ago. But even then I had to put it on hold after a while due to very busy life (as great as the game is). I've recently resumed it and am playing the Elven quests now, and I got to this thread by googling "Elven underground", because I discovered it, but I wasn't sure if it's part of a quest I didn't get yet... because I've had it a couple of times that I missed some quests (and rewards) because I arrived too early to some place.
So, for what it's worth - if anyone else would ever (doubtly
) search an answer to the questions of this thread - here my answers:
1) See Gatts' and Quikpik's answers above. There's nothing else I need to add.
2) I didn't get there yet, I'll update the post when I do.
3) There's a small, rather camouflaged portal on the North-East end of the North-East island in the Valley of a Thousand Rivers map. If it's the same in all game versions, the island is guarded by a party of Ents. In the middle of it you can dig out a treasure, then go around to the North-East end to find the entry to the underground. It's really worth the visit because there's a little big of everything to collect: gold, crystals, rune, leadership and experience of course. Make sure you're ready though, as I had to face a 'slightly stronger' L20 hero in the final battle.