Erox is a deserted town except for a lone man sitting at a table in the inn, which can be found on the western side of town. If you eat, drink or sleep in the inn several Raksasha will be summoned throughout the town, and if you enter the room in the building just east of the inn that contains the book that teaches Create Illusions Lv.3 they'll be summoned as well.
The spellbook is found in a bedroom in a house just across from the inn, in a trapped chest, and the Raksasha that appears in this room sometimes drops a Quicksilver Ring when you kill it. Bear in mind that Raksasha are very hard to kill because magic doesn't affect them at all, and the entire time you're trying to kill them they'll be summoning some pretty tough creatures to fight you.
Once you've killed the Raksasha walk along the water's edge in the town to find a suit of Mithril Chain Mail half buried in the mud.