Alright, I have some idea of how it goes. At least, this is what worked for me, but I don't know if there's a way to finish the quest and screw something up. First, you need to get the quest from Thalia, by talking to her in the top right room of Rust Plaza and picking the 2nd option. Next, you have to get her to at least "fellow" relationship, with whatever relationship boosters you can give to/toss at her. You'll need to do this even if you had her at fellow before you got the quest. Then, talk to her again and you get 3 options. Choose the 2nd one again. Your journal will update.
Now, head to Irma, who is in the room connected to the bottom of Thalia's room. After some text, she'll give you 5 options. I just chose the 1st one. Your journal will update with the key item, "Irma's Dagger". Bring this to Dain. He'll give you 3 options, not sure if this choice matters but seemd to work with choice 1.
Go back to Thalia and talk to her. The screen will go black for a moment, and your journal will update. Now, leave town to the world map. Go right back in, and your journal will update again. Thalia and Irma will be gone. Dain has some new conversation options, but I imagine he just gives you hints on where they go.
Head back to the world map again, and go 6 squares north until you hit the mountains. Go into the square, and you'll be in a new map, Thalia and Irma's workshop. As long as you remembered to go back into Rust Plaza after the blacked out screen, the name should show up if you look at the world map square, although there will still be no indication that something is there.
Talking to Irma in the bottom area of this map completes the quest. You should now be able to speak to Irma and use a scroll of gain attribute to do the limited item fusion stuff, although I have no idea how that part works.
Can't really put a quest page for this up yet since it doesn't have a name other than "beyond also several hundred of the world" according to Google Translate's nonsense. I'm not sure if it shows up in the journal as a quest, despite the journal update notices, but I'm too bored with it at the moment to mess around anymore.