When the campfires grow dim, stories are told. Stories of lost cities, great heroes and legends of old. One of these is the story of Knurlheim. Once the proud capital of the Dwarfs, now a ruin- abandoned long ago. Filled with vast riches and treasure. It’s secrets forgotten with the decline of the Dwarfs, long ago. No one knows is certain if it ever exsisted at all.
A little way up the narrow valley, before they reach the woods, the PCs notice the squat, tumbledown buildings by the riverside. They are hardly big enough for a human to stand in, and the complex cogs and shafts that occupy the central cavity of one of the buildings are perplexing. What were these buildings? And how safe are they to explore?
Alternatively a desolate place is the perfect setting for a derelict chapel or croft. There needn't be any actual physical encounter involved, but it adds atmosphere to a place to see its dead history. For instance, in the Outer Hebrides there are whole deserted villages which were razed to the ground by the English during the Clearances. Such stories give a setting authenticity and character.