It takes some time and a bit of trial and error, and Boone almost looses an eyebrow, but eventually the entire apparatus is bubbling along nicely. Climbing back to the top of the Lighthouse you find Calcifer, still confined but gorging himself happily on the gas bubbling through the hole in to bottom of his sphere. The heat from the caged elemental is so hot you can only spend a minute or two in his presence, and Calcifer emits a blinding light in all directions.
Below, villagers are leaving their homes, swarming to the quay in awe of the bright light. When you return to the quay below the inhabitants of Västervik are overjoyed. Celebrations have broken out in the streets, fishermen sit and gaze out over the water with mugs of ale in hand, seeing islands that haven't been visited in lifetimes. The sun falls, but the street's remain lit with Calcifer's glow as the villagers press you into the tavern to celebrate.