There are two ways to enter the Drake Cave. The first way is to be teleported by Ernest if you steal his book. The other entrance is through a secret passage just south of Golddale. When in the Cave check each area for Rough Diamonds. They look exactly like rocks, but are worth a great deal more.
Writing from the perspective of being teleported in by Ernest, the first thing you should do is head to the southwest corner of the Cave. There's a few items down here, including an Assassins Band.
Head over to the southeast corner of the Cave now. There are a couple Drakes and some Fire Lizards here. Once you've killed them all, check out the far southeast corner of the room to pick up the Mass Healing Spellshard as well as a few other items.
Now make your way up to the middle northern section of the Cave. There's two more Drakes here, and once they're killed, check the northwest corner of the room for a Mass Curing Spellshard.
Finally, make your way to the northeast corner of the cave to find the exit.