You don't have to go back to the Captain. Just walk up to the Droog leader (in the village you describe) and it should trigger a quest update / speech (you might have to talk to him, I can't remember). There is a vendor there for selling loot / shopping too. After you do that there is a path to above the village, and your journey continues... (make sure you check out the dragon when you come to a fork in the road). Castle Ehb comes much later... don't worry about looking for it because you will run into it eventually.
You don't have to go back to the Captain. Just walk up to the Droog leader (in the village you describe) and it should trigger a quest update / speech (you might have to talk to him, I can't remember). There is a vendor there for selling loot / shopping too. After you do that there is a path to above the village, and your journey continues... (make sure you check out the dragon when you come to a fork in the road). Castle Ehb comes much later... don't worry about looking for it because you will run into it eventually.