This is another of those quests that many assume is bugged, when in fact it's just not very obvious.

Piercing actually has nothing to do with it. After looking around for a lot longer than expected we found it - at the base of the Windmill there is a door leading inside, on the door frame there are two spaces to place the runes which will open up a secret instance for further investigation.

Screenshot:

![Piercing indeed][1]


  [1]: https://i.sstatic.net/R0nKC.jpg