The Gnome king can be found within the Gnome Mines, accessed by activating and riding an appropriate elevator. When encountered, he is being guarded by two ogre servants, named Pain and Disease.
If the player has killed many gnomes on the way to the throneroom, the Gnome King sentences the player to captivity within his wine cellars at the very bottom of the mines. If the player hasn't killed any,the King will say that you are a friend of his people, and beg you to take this golden key and go kill the beasts that now live in his wine cellar. If you have only killed a few gnomes, he wants you to pay a fine before he will ask you to go deal with the beasts. You can either pay the fine, or continue killing gnomes until you are sentenced to imprisonment. Note that if you are invisible, and try to talk to the king, it will say "the gnome king doesn't seem to recognise you." To interact, you must become visible.
However you enter the wine cellar, it is important not to kill the rats by polymorphing them into lesser creatures. The polymorph will work just fine, but the resulting creatures will not drop the special goodies you came here for. Huge rats drop +3 armour and similarly nice things -- occsaionally rare items such as the Feathered Hat, and Legendary Weapons.
Jailtime - Option OneEdit
Accepting the King's sentence, you will be teleported to his wine cellar. The cellar contains Huge Rats, with are fairly easily slain with decent equipment. These rats drop valuable loot and enchanted weapons, and since the cellar can then be easily exited after finding the golden key, the venture is quite profitable. Returning to the gnome king will result in no new adventures, as he will only shoo you away from then on.
Jailtime - Option TwoEdit
Instead of accepting the king's sentence, you may engage him and his servants in a fight.
If you start the fight while talking to the Gnome King, you will find yourself flanked, which is not an advantageous position to be in.
If you (and needs verification, but not your pet) kill the King, the Gnome Jeweller from the Jewellery Store will arrive and demand money from you (for him to stop fighting you). If, instead you kill him he will drop the Golden Monocle and a varying amount of gold.
Upon killing them all you can claim the throne and the entire Gnome Mines. A dialog will announce that you are now the king and no more gnomes will attack you.
The King will drop a crown (heavy and +1 Cha), a piece of gnome king innards, his outfit, some gold and a golden key to the Wine Cellar.
The entire throne room is a "no-teleport" area, so if you start a fight verbally with the King you will be surrounded. Instead of verbally challenging the gnome king, you could try dropping a delayed action magic gem (like a Firestone), which sometimes will kill the king outright. This will then also allow you to leave the throne room for the rest of combat, which will allow you to teleport or flee if the battle goes badly.
If you haven't slain many of his people he will say pay me 1,000 gold or else. If you pay the gold he will give a quest to go to his wine cellar to slay the creatures to become his friend. He gives the cellar key. If you do this upon return he gives 500 gold. Another time I had only killed a few gnomes and he said you have killed my people but we are desperate, monsters are in my wine cellar then gave the quest without demanding gold, he still gave reward for clearing the cellar.
If you haven't killed any of his people, he will pay you 1000 gold for killing the rats. Strangely, he doesn't hold you responsible for deaths caused by your pet. One way to get to the king without killing any of his people is to teleport them away whenever you see them. Or, if you have a Ring of Teleport Control, you can teleport yourself to just outside the throneroom. Teleporting the Giant Rats -- once they have left the wine cellar, which is a teleport free zone -- makes the fight easier. The rats will still drop their very nice loot, whatever level they die on.
If you fight him, don't forget to interact with his empty throne to claim the mines as yours.
Try not to blow up the bottles of wine when killing the rats -- one reason to fight them outside iof the cellar proper. You will want to take the bottles of wine, even if you have to make more than one trip, because 36 or so of them are heavy. Visit a Priest. Blessed bottles of wine, when drunk by a non-confused player (or pet) in perfect physical health confuse the player but add 5 points permanently to their max HP. This is true of those you find blessed, and ones that you get blessed in the sanctuary. If adding HP to pets or companions, have them drink the blessed wine far away from the Priest NPC, as confused companions are prone to attacking Shopkeepers.
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