There are 3 pools in the lower area of Fei'Yin at H-8, H-5 and F-5. When F-5 is inspected, Dabotz's Ghost appears. He can cast Tornado and does a variety of black magic, Smash Axe can stun it.
It is possible for anyone else with Scattered into Shadow finished up to this point in the party to obtain the cutscene after Dabotz's Ghost is defeated.
While he tends to spawn at the third pool, Dabotz's Ghost can spawn at any of the three pools. Just make sure you use up all of the Aquafloras after you defeat him to continue the quest.
If you spawn Dabotz's Ghost while under the effects of Sneak, Dabotz's Ghost will just sit in the pool. Either drop sneak before you inspect the pool, or after it spawns, drop sneak and take a step or two to get aggro.
After he dies, inspect the pool again for a cutscene. Inspect the other two pools in that area if you didn't get them on the way in (or he spawned at one of the other two pools before you got to the third one).