Nibani Maesa, the Urshilaku Wise Woman is happy to see you, or at least happy to see the copy of the Lost Prophecies and other books that the Dissident Priests gave you (you get a +10 to her disposition and a +1 to your overall reputation for showing up with the books in hand). After that, she'll tell you to come back and talk to her tomorrow (you can always "wait" for 24 hours).
She tells you that you have met the first trial (it happened when you generated your character). When you explain how you were "cured" of Corprus disease, she will decide that you have met the second trial. But she sends you to Sul Matuul for the Third Trial.
But Sul Matuul is not satisfied that you are ready for the Third Trial. He wants to test your mettle as a warrior first. So he sends you to Kogoruhn to retrieve three items to prove your worth. After retrieving the items, he will pronounce you ready for the Third Trial and send you to the Cavern of the Incarnate to retrieve Nerevar's Ring.
This one is a piece of cake. A veritable walk in the park, though which direction you should walk will sound a bit confusing. Sul Matuul sends you to the Cavern of the Incarnate to retrieve Nerevar's Ring. Except for random encounters, it really is just a matter of walking there and back. After talking to Sul Matuul, go out and talk to the Scout to get more accurate directions on getting to the cave. But even what he tells you seems to throw most players for a loop, so here's my never-fail system for getting there.
Before you leave, it would be a good idea to empty out as much of your inventory as possible because you're going to be picking up about 100 pounds of goodies.
Break out that paper map that came with the game. See where the mountains meet the Grazelands just west of Tel Vos? See that J-shaped valley just inside the mountains? The cavern is at the bottom of the J.
Don't have your paper map? That's OK. Follow the shoreline east until you hit the mountains (you should have to swim around the headland to get into the Grazelands). Now look to your left and you should see a valley. Head down that valley and you'll find the cavern at the end.
This is a very special cavern. First off, there isn't anything inside for you to kill. Secondly, the door is only open between 6 and 8 (morning and evening). So walk right in and take the ring out of the statue's hands. You'll get a little cutscene and suddenly you're surrounded by semi-transparent people. Talk to every one of them. They are all failed Incarnates and each of them has a few goodies for you.
Unlike the monastery, the door is only scripted on the outside, so you can leave whenever you would like. Return to Sul Matuul with the Ring to complete the Third Trial.
Although you can't tell, there were a few things that happened when you picked up the ring. Most importantly, and as far as all of the native factions are concerned, you are the Nerevarine and have joined the Nerevarine faction. See the next quest about declaring yourself and all that entails. Secondly, you gained 5 points of overall reputation. All of the native factions have it in for you and picking up the ring just made you more popular. Go figure. If you are a member of the Temple or Redoran factions, you just gained 4 points of faction rep. Again, go figure. I suspect that this is to counterbalance the fact that your membership in the Nerevarine faction will drop initial dispositions of members of those faction and you may still need them for quests, supplies, healing, training and whatnot. Anyway, enjoy your newfound fame because life is about to get even more interesting.