I suggest a quick Walkthrough of this mission to everyone: Not far from your spawn point, there is a mage's hut; approach it and you will be shown two keymaster tents with dungeons. Go to the right one (red, I think), take the key, and go to the second tent (there is also a Sanctuary nearby). You don't necessarily need to enter the tent—immediately open the border guard and head underground. Underground, go left until you hit a lava river, then follow the shore down. Later, you will see a demon hero (a weak one); kill him (the fat bastard standing in the passage) and climb the ladder he was guarding back up to the surface. Once you emerge, go down; there is a demon city there. You can capture it and learn a couple of useful spells, then it will be destroyed. Go a little further down and capture the final garrison; place both heroes behind it and kill Vaer as soon as he appears. The other demons won't wake up for another five turns or so, so you don't need to rush.
P.S. And I almost forgot—be sure to watch the cool video