They know the general direction of it not were it is. Pretty much the most they can do is say it's that way and point. Anyway it's too late to do anything about that now anyway.
Lost Mine of Phandelver book, page 8, "What the Goblins Know" sidebar AND I QUOTE: "The goblins can provide basic directions to Cragmaw Castle. It's about twenty miles northeast of the Cragmaw hideout, in Neverwinter Wood."
Given that they knew the general location ("hex") that the castle was in, I took a page from the Kingmaker rules and glossed over the hexploration, assuming that the PCs would inevitably find the BIG HONKIN' CASTLE RUINS after some time exploring the forest -- especially given the presence of two woodsman types in the party.
When my PC's captured a Goblin and asked for directions to Cragmaw Castle I used the example used by WOTC when they played through the first session of LMoP (see youtube video)
The Goblin told him the Castle was in the direction somewhere between where the sun comes up and where it never shines (N-E) and half-day to a day of travel.
I told them that trying to go there could cause them to be lost and wander around a bit before finding the castle. They could encounter all sorts of danger before they find it (random encounters)
This seems to have scared them out of looking for the place at the moment.
They captured the fainted Goblin in the Redbrand Hideout and if asked about it then it will tell them of Goblin patrols in the area that they can track.
In retrospect, I think that would be the BETTER way to run it, only because it encourages the party to play about with the other quests available in Phandalin instead of rushing off to rescue the captured dwarf. As it stands, one of the PCs is a cousin of Gundren's, and really pushed to head right to the castle to rescue him ASAP. The knew where the Redbrand hideout was, and they didn't even bother checking it out in their haste to get to Cragmaw Castle.
But that's not really what the adventure tells the DM to do, or even hints that he SHOULD do. The bard negotiated extensively with Yeemik and bargained the location of Cragmaw Castle as part of the party's fee for handling the interloping bugbear. That's just how it played out.
So as a sort of update -- the party got their butts handed to them in the fight at Cragmaw Castle. After alerting the front door guards to their presence, and retreating just long enough for those goblins to spread word around the castle that someone had just approached the front door, they came back and scouted around the whole structure -- being noticed several times by goblins and hobgoblins who were now alert enough to be actually manning their posts and looking for them. These fired a few potshots at the party but didn't cause serious damage.
Eventually the party (correctly) assumed that a good place to breach the castle would be at the ruined section on its Northern side, and entered there. They were fired on as they approached by goblinoid guards, who quickly attacked them and sent runners to go alert everyone else. This resulted in a grand battle at that section of the castle, where the party encountered most of the sentient inhabitants of the castle in waves. They dispatched the first couple of hobgoblins before they were even able to attack, but they soon learned the nastiness of the hobgoblin special ability where they work in tandem to do more damage when they attack.
In the end I think they killed three hobgoblins, King Grol's wolf, and (miraculously, thanks to a couple of crossbow crits from the rogue) the "drow" emissary of the Black Spider. In exchange, the bard and cleric both fell in combat as the rest of the party realized they would soon follow if they didn't retreat.
We rolled afterwards and learned that the bard died, while the cleric technically lived unless the goblins killed him. The player decided to roll a new character so I'm not sure whether I should have him killed or not.
What was left of the party ran back to Phandalin, pursued by a trio of goblins on wolves who attacked them before they could rest. Luckily for them, one of the new PCs (dragonblooded paladin) happened to be nearby scouting the forest for a green dragon he'd heard was in the area, heard the commotion, and intervened.
The party is now level 3, is in Phandelver, and has decided to take on the Redbrands before reconsidering Cragmaw Castle. The dwarf wizard who is cousins of Gundren Rockseeker decided to seek out Gundren's brothers, giving the party the slip as he has a hunch about where they are but doesn't want to reveal the location of their last known claim (his player won't be with us for a few months).
So we're now down to five PCs of third level assaulting the Redbrands. Since one of the PCs (the rogue) was once a member of the Redbrands (backstory ripped from the pregen character), this should be fairly easy for them as she has simply led them through the secret tunnel, past the Nothic, and directly to Glasstaff's chambers without having alerted anyone.
Our next session will feature that battle.
The adventure definitely HINTS that it should be done this way. It says multiple times that the PCs will be in town searching for the location of Cragmaw Castle. When I read it the first time, it confused me...why would they be in town looking for the location of the castle when the goblins in the cave know where it is and they likely got that information from them? It wasn't until then that I reexamined the section on what the goblins know and I realized that it was meant to be vague on purpose. They could tell the PCs approximately where it was but they might wander a forest that size for days or even weeks without knowing its exact location.But that's not really what the adventure tells the DM to do, or even hints that he SHOULD do. The bard negotiated extensively with Yeemik and bargained the location of Cragmaw Castle as part of the party's fee for handling the interloping bugbear. That's just how it played out.