Damon's Spire
As you arrive at the Spire and try to enter, an Old Man appears and demands you answer his question before proceeding. This old man is Damon, the Spire's owner. Mia will automatically read the Old Notebook, and tell Damon the answer, which is Knowledge. Once Mia answers him, he lets you enter his dwelling.
Upon entering, you'll have to step on the colored switches on the floor to open the doors to get to other parts of the Spire. This will continue all the way to the top, so don't be surprised. You won't find much of interest on the first floor since the thieve's guild regularly tries to target the Spire, hence all the empty chests. Once you make your way to the southwest corner, Damon appears again to ask you another question before letting you pass. Mia again, knows the answer, but let Nash answer to make him look rather foolish and then let Mia answer (which is Magic) ^^. You'll soon find out that the answer is a hint to proceed during the next level. On floor 2, to beat the enemies, you have no choice to use anything but magic. So make sure you try to avoid most of the enemies as best you can. The stairs to floor 3 are in the northeast corner, but if you feel you need them, there are 2 Star Lights along the way.
When you arrive to the stairs going up, Damon appears to ask you another question. Nash knows the right answer this time, but whatever you do, don't let Kyle even attempt to answer cause he'll get zapped down to 1 HP and that won't help your cause. The answer is Force. On the 3rd floor, you'll have to have Alex use Sword Dance and Kyle use Power Slash, since they are the only attack that harm the Rufus'. When you come up on the 3rd floor, the stairs going up are one room to the west, but go one room south first to nab the chest there for Sage's Clothes, which you should then give to Mia or Nash. Once you make your way to the stairs going up to floor 4, you'll encounter a very sick man. While he asks Jessica for help, he is an incredible jerk in the process which really gets Jessica pissy. hehehe. Either answer will work, but "Let him learn his lesson." is a much more amusing sequence to watch.
Once you arrive on the 4th floor, make sure you take the time to explore each room (there are only 6), to get a Spirit Bandanna, a Star Light and an Ice Pendant. When you do that and get to the stairs going to floor 5, Damon appears yet again. This time, he doesn't ask you a question, but makes a demand instead. He tells you that you now must send back the least important party member (we all know it's Nash, but hey...) or that you will all die. However, the correct way to answer the question, is to keep saying that you don't want to get rid of anyone (ie- choosing the second answer) until you get to the choice "We won't make anyone leave!". Damon extols you for your wisdom, and lets you proceed to the 5th floor.
The 5th floor has nothing special. No enemies, just two swtiches and two doors with 4 rooms. Just hit the switches until you can walk into the southwest room. Here, Damon offers you a final test. You must sculpt the clay in the middle of the room into something valuble. You can have the others try just for fun and some laughs, but you won't proceed until Alex and Nall have the others sculpt a model of Luna, but the funny thing is, everyone else thinks it is Althena...hmm...either way, your access is now granted to Damon's Lair.
Once you walk up the stairs and talk to Damon, he gives you what you need, the Theives' Guide. He is the master of Knowledge after all. He also grants Alex and his friends the ability to read his books in his tower (which you couldn't do yet since they were magically sealed..duh). You should take the time to read them on your way out, but talk to Damon a few times for a dose of reality before heading back. Make your way down the Spire, reading the books as you go. Once you leave the Spire, head back to Meryod first to give back the Old Notebook to the Guild person there. This will earn you a Silver Light and this is the only way and time to get rid of the Old Notebook from your inventory. After you do this, head back to Reza to talk with the Mayor (the bartender, remember) again.