My players were very paranoid about being found and were careful to take the long way to the Fire Forest, so they also missed out on the camp.Despite my nudging they didn't go check out the mercenaries' camp, so they missed the loot, including the Dream Shroud.
It's been some time, but I also remember this fight being tough. A solid spellcaster with martials to hold the line can be very effective.The PCs kill some Ragesians, kill an inquisitor (very satisfying), and free the prisoners. This last fight was actually rough. The inquisitor's fire spells in the fire-empowered environment makes for a very deadly opening fireball.