She tells you to retrieve a Fae spirit bud from the newbie area to the north. To do this, you'll have to catch a shrumbler from the goblin cave in the SouthWest of that area (not the caves off of the passageway from Greater Faydark). Use the "Shrumbler Net" in your inventory.
Once captured, bring it to a sandsponge in the water by the beach at -346, -71, -762 . Harvest the sponge then kill it. Then pick up the shrumbler and release it in the nursery area. It'll choke on a spirit bud.
Right click to gut it and bring the spirit bud back to Xilania.
Xilania wants me to help her steal a Fae spirit bud. However, the fragile nature of the spirit buds will not allow me to merely grab one. Instead, she would like me to capture a shrumbler hatchling, soak it in the stomach juices of a sandsponge to constrict its throat, and use it to find a 'ripe' Fae spirit bud. With its constricted throat the shrumbler will be unable to swallow or digest the spirit bud. I can then slice the shrumbler open and successfully retrieve the intact spirit bud.
Xilania would like me to help her capture a living Fae spirit bud.
I need to capture a shrumbler hatchling in the caves Xilania told me about.
I have captured the hatchling.
I need to use the hatchling to fish up a sandsponge and then retrieve the hatchling's body from the sandsponge.
I have retrieved the hatchling from the stomach of the sandsponge.
I need to release the hatchling near the Nursery and cut it open when it tries to swallow a spirit bud.
I have obtained the spirit bud.
I need to return to Xilania.
I have spoken with Xilania.
I have captured the Fae spirit bud.
I have obtained a Fae spirit bud and brought it to Xilania.