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Finding the Troll
Walk out to the destroyed bridge just outside of Lobinden to find a man being attacked by three nekkers. Use a silver sword to quickly dispatch them, and then talk to the man. He'll explain that the troll has gone mad and spends all of his day drinking. He'll mention that Chorab over in Lobinden can probably help you seek a different course than just killing the beast though.
If you're interested, walk back to the village and go to the back to find Chorab. Talk to him and ask about the troll. He should ultimately offer 200 orens if you can get him to stop drinking. When you're ready, walk back out to the bridge to speak to the troll. He's waiting at the bottom, so drop down the rocks by the right side of the bridge to reach him.
Regardless of what you tell him, he'll try to fight you. This isn't too hard though. With a silver sword, a fast hit will do a lot of damage. Just roll out of the way of his attacks and then slip behind him for a few easy hits. If you don't want to kill him, you just have to get him to 50% health.
If you want, you can just kill him now and claim the reward. Walk over to Louis Merse. If you don't, you can ask him why he's drinking. He'll explain, in his own way, that his wife was killed by some poachers. He's just drinking because of the depression. It seems like we might be able to help with that in some way. Agree to help him with his problem and then head back into town.
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Talk to Zoltan and Sile to get a bit more information. They both basically say the same thing though. The only thing that anyone would want a troll's head for is a trophy, and it would really only impress somebody out in Lobinden village. I'll cut to the chase, and tell you that it's clearly visible in Sendler's house. You can find it in the middle of the village, just outside the town. No reason to waste time checking all of them. Just go over and talk to him about it. He'll tell you that Dmitri, the bandit leader in the area, killed the troll, after a little persuasion. He doesn't know where they are at the moment, but he's sure that one of their men is waiting around in the inn.
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Getting the Troll's Head
Note that you can get the troll's head from Sendler. You just need to beat him at a game of dice. If he won't let you play, you can work your way up by playing the beginner's dice poker people in the inn, then Einer. After you beat him at a game, you will be able to tell him that you don't want his money but that you'd rather trade. Along with the three trap diagrams, you'll be able to ask for the troll's head on the wall.
Apparently, you can still do this if you beat him already. You just need to play him a few times to get the chance to ask for it. That's what I've heard at least. It's not actually a vital part of the quest, it's just a nice bonus if you decide to help the troll.
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On your next trip into town, go into the inn and walk down to the basement. Right outside of the fist fighting area, there should be a large man leaning on a pillar. He'll also have the quest marker on him, if you're tracking the quest. Talk to him, and ask where Dmitri is. You can try to intimidate him, or just challenge him to a fight. Note that the fight is just a fist fight, and he really has a glass jaw. I believe that he hit the ground in four hits. Just beat the QTE, and he'll tell you that Dmitri is out in the old graveyard in the forest.
Walk out to the forest and head down the path to the left to find a ledge that you can climb. You'll be able to walk up into the old graveyard and listen in on their plan. Dmitri is exactly as bad as you figured that he was. He's also involved in some darker games with Loredo. Once the cutscene ends, you'll end up in a fight with him.
The first step is to jump back quickly. Roll away to avoid the first few hits. You probably will not have the room to try an Axii, so I would focus on just getting your Quen up and then keeping Aard ready. Using Aard and then following up with a quick hit has a good chance of chaining up an instant kill move, and it's also just a good way to do damage.
Stay mobile and keep your parry up. If you have riposte, then this will be incredibly easy, since even Dmitri can be instant killed with the upgraded version of the move. Other than that, it's just a matter of moving around, picking off the two weak ones, then the shield user, and finally Dmitri. Something as simple as parry and counter attack will be fine for the most part, if you keep Quen up.
Once they're dead, you can get a key for their hideout off of Dmitri's body, if you just really want to crash it. The quest is actually just about done though.
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Finishing the Contract
Go back and pay the troll a visit. If you give him his wife's head, he'll thank you and give you the diagram for the hunter's armor. It's actually really nice, although I personally think the Kayran armor is a little cooler. They're practically the same though. I will note that it's far easy to make the hunter's armor than the Kayran armor. You just need the basic crafting materials for that. Sendler can probably set you up with enough to make it.
If you tell him that you killed Dmitri and avenged his wife, he'll agree to stop drinking and start repairing the bridge. With that done, you can walk over to Chorab at the village. He'll try to talk you back down to 100 orens. You have a few options to make him pay up, but it's your call. You should be able to just quietly point out that the troll kept his word, so it would be pretty bad if Chorab was the one who backed out of the deal. He should begrudingly agree to hand over the 200 orens.
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All screenshots and information from a "normal" difficulty playthrough of Witcher 2.
Due to the branching nature of the game, your experience may differ. If you have noticed anything, please feel free to note it below.