Yes, I'm option 2 as well. 

Option1 : 0

Option 2: 3

My suggestion for this specifically would be to use the prestidigitation cantrip to direct the smoke (I think it can do this), but open to other solutions. Then perhaps put a web in the doorway. Thoughts?

Nodding her head once to Hornet's plan, Soledad spoke a word of power. Magic swirled around her forming an invisible skin of protection.

"A confrotation is inevitable, but I think we should use the narrowness of the passageway against them. I can create a magical web to ensnare them like hanging fruits to pluck off one-by-one with your arrows. Perhaps we can create our own wind to smoke them out? As you say, we know not what we will be walking into..."

((OOC: Mage Armor))

I think we should let the theives scout ahead first. I vote for letting Hornet go alone, or if backup is needed then send Silver along as well. Both are thieves and elves.

As the group made camp, talk of watch was raised. Soledad needed the time to fully replenish her magical energies. Although she would have to leave sitting watch to the other elves, she could add a bit of magical vigilance to their encampment. Drawing upon the ambient magic in the land and sky, the witch worked her ritual, setting an invisible web of fey magic to stand guard over their encampment. If any intruder threatened their rest she would know. 

((OOC: Cast Alarm as ritual. Alarm set to mental "Ping"))

I agree, we need a long rest. Here's the updated prepared spells for Soledad (changed it on DnD Beyond too).

Lvl 1: Fog Cloud, Mage Armor, Silent Image, Sleep

Lvl 2: Phantasmal Force, Web

"Agreed. That fool in a red hat might well be the very leader of the wretched goblins we seek." Pausing Soledad returned her gaze to the fey otter. "I wonder, Beuren, could you tell us more of this fool in the red hat? Or of the Vargolg? Has a dark history returned again?"

((OOC: Pausing for conversation))

"And we thank you, greatly for leading us. Perhaps we might take some time to rest before we journey, if there is time. I think we all could benefit from that."

A gleefully twinkle sparkled in Soledad's eyes at Beuren's suggestion that the elves could not pronounce Boris. She ADORED cruel humor. If the capacity for speach wasn't proof enough of a fey nature, the otter's jibe erased all doubt. While that may have awakened fondness, it did not instill trust. Fey creatures, whether benevolent or cruel, were tricky by nature. And she should know, she was particularly fey herself, even among the elves. 

Soledad listened carefully as the conversation continued, seeking any signs of hiddens meanings. All the while she sought the depths of her own mind for stories of river fey and otters. There had to be a connection. 

((OOC: Trying another knowledge check, more general into histories/stories of river gods/fey and otters))

With the last of the wretched bugbears having fallen, Soledad released Z'zzip from the pocket dimension. The irridescent, fey serpent wasted no time in throwing a litany of insults at the very ugly and even dirtier bugbears. Hissing in agreement, the witch traced a finger affectionately along the golden snake's head. She was very glad to see the beasts dead, such was the price of ugliness. 

The talking otter presented a curiosity that indeed needed exploration. Why was it here? What did the beasts want with it? Where did it come across that fool name of Boris? Oh how insipid was the common human tongue... Curious though she was, she gold elf had no trust for the otter. While there was beauty to be found in the wild places, so too was there trickery. Talking animals could easily be tricksy fey, wandering gods, or accursed in some way. 

Snapping her fingers, Soledad set a fey charm to clean away any offending dust or grime she might have picked up along their trek. One  did have to make oneself presentable for conversations. Besides, she hated being dirty.

Keeping her distance, the witch set her violet gaze upon the otter and smiled coyly, "Well met, Beuren. Such interesting titles you carry... How did you come to be known as Beuren and then as Boris?"

((OOC: Prestidigitation Cantrip. Also, do either of these names remind Soledad of any kind of lore?))

Soledad's firebolt struck true, rewarding the witch with a howl of pain and the aroma of burnt bug bear. Fire certainly increased the stink of the filthy beast, but it nonetheless filled the gold elf with joy. And so, wearing a viscious grin, Soledad unleashed yet another pulse of flame upon the wretched bugbear.

((OOC: Firebolt to BB3))

With one of the wretch's asleep and the other dead, it was time for Soledad to focus her attentions on the miscreant that had the audacity to escape her nightmare illusion. The bugbear would pay dearly!!! Taking care to remain hidden within the wooded cover, the witch moved to a vantage where she could better see the beast. Flinging out her hands before her, Soledad released a mote of white flame that sped towards the still waking beast. She dearly hoped the fire burns hurt.

((OOC: Firebolt targeting BB3))

Why that stinking, wretched cretin!!! Soledad cursed silently to herself as she felt the bugbear snap free of her illusion. It was unfortunate that profane litany remained in her mind alone, for this was a truly creative combination of words that surely would have drained the color from any that hear. Cursing, in its many forms, gave her a unique bit of joy. In an effort to hold onto that joy, the little witch spun another curse. Spitting a word of power, Soledad once again unleashed a sleeping hex upon the bugbears. However, now each of the beast had been injured greatly weakening their resistance to her fey magic. If things went her way, in a short moment she would be slitting the mongels throats as they slept. 

((OOC: Sleep aimed at bugbears and to avoid all allies.))

Seeing the bugbear try to rouse its companion from the curse only brought a smile to Soledad's lips. Caught up in the illusion, the beast was utterly covered with biting spiders. An unending deluge of the venomous creatures crawled along every surface of the bugbear's body. As the beast screamed they crawled into its mouth biting its lips and tongue, and every surface they crawled upon. If the beast opened its eyes, they attacked, crawling into any opening they found to bite and bite and bite. They were in its ears, so all the bugbear could hear was the terrible, terrible clatter of their spindley legs. The swarm of spiders had become the beast's world. Nothing would change that. 

((OOC: Maintaining Phantasmal Force))

Please go for it. Everything I've done has been to reduce the number of acting bugbears to make melee easier for tanks. Would love to see our tanks engage. I believe that's Constantine and Steele. Thanks!

Soledad made sure to keep hidden from the bugbears as she concentrated on maintaining the nightmare illusion. It was particularly irritating to see the sleeping bugbear awakened from her hex, so naturally she took her ire out on the one caught up in the illusion. As the onslaught of biting spiders continued without any end to their number, Soledad spun horrible, unimaginalble pain into each and every spider bite. It was maddeningly painful and it would not stop. This was the kind of pain that broke the mind and the poison was making it hard to breathe.

((OOC: Concentrating on maintaining Phantasmal Force))

Can I suggest we focus on the wounded and yet awake bugbear first? Phantasmal Force will effectively take the unharmed one out of the fight. This way we can focus on the bugbears one at a time. 

Dragon: the site crashes regularly from traffic or other means but comes back, just part of DIY platforms. 

Rage boiled in the little witch as she witnessed not one, but two of the beasts resist the sleeping hex. Such rudeness would not be tolerated, especially from vermin as dirty and ugly as bugbears. Unacceptable! Soledad hissed a curse, but magic laced her words. Invisible yet potent, a web of dark magic spun out from the gold elf's lips to bind the mind of the bugbear that had managed to escape spell and injury. 

Soledad wove the threads of magic into a tapestry of horror, and sent the illusion to take hold of the wretch's weak mind. A swarm of thousands upon thousands of poisonous spiders crawled out from the earth below. Within the passing of a breath the venomous creatures covered the bugbear completely, they crawled into every crevice biting and biting and biting. And there was no end to their number. 

To every other eye, the bugbear screamed and thrashed at something that was not there. It was, afterall, an illusion. 

((OOC: Casts Phantasmal Force to target the unharmed bugbear))

Missiles flew past Soledad towards the bugbears with deadly accuracy. The witch exhaled for two heartbeats and then struck sending a sleeping hex to ensare the beasts. The timing was precise, perfect; just as the arrows bit into bugbear flesh Soledad's spell fell upon them. 

((OOC: Sleep on the bugbears timed to hit them after the arrows do))

I agree, we should rescue the otter creature. Assuming we are going to attack and kill the bugbears. Shall we form an attack consensus here?

I can have Soledad hit them with a Sleep (Lvl 1 or Lvl 2), distract one or both with a Silent Image, or hit one of them with Phantasmal Force (that will take it out of the fight long enough to deal with the other). 

Another option, if someone has Faerie Fire or something similar they can outline the bugbears with glowing light, then Soledad could throw up a fog cloud. Blind them and hit them with arrows. Thoughts?

Nomad, just checking spell slots. After the short rest Soledad regains 1 or 2 slots? Thanks!

Soledad regarded the newcomers coldly as Z'zzip slithered their irridescent form over her own gold skin. The irrascible snake was, for the moment, silent and content. In this, the fey witch saw a sign to place some semblance of trust in the men that had just joined their number. Though the path ahead yet lay beneath a veil, they might well be of some aid in finding it.

"We can all agree," Soledad spoke decisively, "that we must pursue the wretched vermin to their source to cut out its heart. Yet, we know not where the cretins are hiding and the rain will only work to hide their tracks even further. Lest some of you have some means of enticing the wild to reveal its secrets, we may need to returned to Botkinburg. We know more than we did, and I still do not trust fully that the villagers have shared all they know."

Soledad maintained her calm visage as the stinky little goblins spewed their bravado. It was clear they had told all they were going to share. It was time to end this.

"Did I not tell you to respond politely?" the elf cooed, dangerously.

A heartbeat passed before the witch slowly guided the dagger into the goblin's eye, magically pushing the blade in to the hilt. With the deed done, she stepped forward to join the conversation between her companions and the new visitors. 

"Agreed, Hornet. Let us continue this conversation and our introductions under the shelter of the farmhouse."

Soledad hissed an elvish curse. She had run out of patience with the wretched vermin. Quickly scanning the goblin horde, the golden witch spotted a small blade. Far better to use one of the miscreants own weapons than dirty her own with their stinky blood. Spitting a word of power she snapped her fingers and the dagger floated into the air as if come to life. With another gesture she guided the blade to float, point first, barely a fingertip width away from the eye of the ugliest of the two goblins. 

Soledad smiled with viscious cruelty as she spat out the goblin tongue, "You may not fear death, but there is much we can do before we end you. I for one think removing one of your legs would be a vast improvement. Now, I have questions. You will answer them, politely, or you'll loose this eye. Then you'll loose the next. And so on. Do your insipid twit brains understand that? Good. Now, who leads you? Who sent you to Botkinburg? Where is the Red Cap camp? Start talking, and remember, I expect truthful and polite answers"

((OOC: Mage Hand))

Soledad let the others spend their time killing the nasty little goblins. She'd already done her part in putting the little snits to sleep, and besides, they had much better weapons to get the job done. Instead, the fey witch focused on searching the growing mass of goblin corpses for any signs of valuables or clues they might put to use. Of course she didn't want to actually touch the wretched things herself, and that was where magic came in. 

Ritually summoning an invisible force into existence, Soledad set the mindless creature to the task of going through every pocket, bag, shoe, and hat in search of any items, notes, or signs that might be hidden among the dead goblins. It was a very, very dirty task and she was more than happy to have the help. 

((OOC: Ritual Casting of Unseen Servant))

Bind and keep two healthy ones and kill the wounded one. 

I think a capture is a good plan. Can I suggets we try and take out those still in the fight first? Sleep lasts a minute (or 10 rounds), so we have a bit of time to take out the others first - better chance of us all taking less damage that way. That said, do whatever action makes the most sense for you.

Soledad smiled cruelly as group of stinking goblins succumbed to the hex and feel into a slumber. The witch hoped dearly that the hex sent them painful dreams from which they never woke. Still, a number of the little twits still stood. It was time to change that. Soledad struck again, hurling the sleeping spell at the remaining goblins. 

((OOC: Casts Sleep, first level slot))