More Plot Hooks
One of the more prominent merchants in town accidentally left his wedding ring (or other bit of precious given by his wife) in his clothes when turning them in for a wash; and now he's desperate to get it back.
The hunt is on for the halflings and rogues within the party to sneak in and find the ring before it gets tossed out in the wash water and before the merchants wife notices it's missing.
Excellent sub and full of great ideas. Any interesting question arises however, does the society allow/encourage inbreeding/incest? Or do they send out raiding parties for new people every so many years?
If they do send out raiding parties to acquire the best and brightest for their lands population it makes for a great springboard for adventures such as:
To rescue a Living Treasure
The heroes find themselves on a hired to rescue a world renowned artisan who was suddenly abducted by strange white clothed warriors who sailed off to the north.
Rite of passage
As part of the passage from child to adult, young adults of the mist valley must join a "gathering party" and leave their land to return with several people of worth to join their culture and keep it strong. For these young warriors who have never known debilitating injury or sickness the outside world can be a daunting place, but tradition demands they return successful, or not at all...
Sanctuary, Refuge Denied
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Fleeing a war, plague or continental catastrophe a ship full of refugees seeks sanctuary in the magical northern lands, rumored to be safe from all the mortal worlds horrors. Unfortunately while following a returning group of gatherers they manage to wreck their ship upon the coastal rocks, and are forced to either negotiate with these secluded winter warriors, or find a way to breach their defenses and carve a piece of the mist land for themselves.
With sub has good potential, and with an update to expand upon it, would be another unique sub for the fey collection. Like Scrasamax said, what happened to make the fey such a coward? Is he a coward just to other creatures besides fey, or fey as well? (And if yes to both is there a different reason behind each?)
Simple and brutal, a fun variation on the more traditional ax so many Dwarven characters equip themselves with.
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A Regiment of soldiers trained in these would make for an interesting subdivision of a otherwise famous mercenary company as well. "Calrissa's Cleavers" or the like.
As others said, it could use some more fleshing out and reworded in places, perhaps reading the post out loud to yourself will help you catch the grammar errors such as "You know the true behind all the conspiracies,"
In general I've found characters are more appealing and memorable when they don't act "just like" any popular character from a novel or movie. Rather then suggest role playing the character like an already established one (in this case Gandalf) try to provide enough depth and detail in your presentation they will be able to act like the character they just read about instead of imitating a different one.
A unique city and problem for characters to encounter. It can be a great place for a party to be tasked with infiltrating for the purpose of either retrieving a lost artifact or rescuing someone accidentally sent here. (assuming they aren't already infected by the insanity.)
Another interest possibility is that it's not the people that are insane but more an artifact or curse upon the area that's making them act insane. Trying to smuggle someone out to verify this could prove quite challenging, especially if the persons insanities are disruptive or extremely dangerous.