This is part of a first-playthrough guide using the Faerie story arc. It covers both the original PSX version and the 2021 HD remaster, though some place and item names differ slightly in the latter. You can find an overview of the Faerie% path here.
The Quick Version
With The Murmuring Forest complete, return to Gato Grottoes to see Escad (the purple warrior guy from the last quest) entering the Temple of Healing. Head to the temple to witness some tense moments between Escad and his friends, then help Daena track down a kidnapper in the caves below. No Artifact is awarded for this quest.
The Details (May Contain Spoilers)
At the Temple of Healing, go up into the Prayer Hall and then around to either side to access the Cloister. At the top of this room, speak to Daena (the cat person) to be admitted to the Dreamweaving Room. Witness the cutscene there and exit to find an oddly-dressed nun about to enter the room. This nun is a kidnapper, and you can either follow her back into the Dreamweaving Room or leave the temple directly. Either way, Abbess Matilda is whisked away by magic and your next job is to find her.
Last time you visited Gato Grottoes, you needed to traverse the caves on foot. This time, you get a fast-travel menu when you attempt to enter the caves (the town map node left of the main entrance). Select “To the Dungeon” (HD: “To the caves”), then speak to Daena and agree to go “To the sealed room.” Walk up the steps to the right to enter the Meditation Room. There, fight the Spriggan boss to trigger a final cutscene and end the quest.