First you need to get into the mill.

Talk to Gottfried. He will be in the tavern after you have visited the woods.

Why is he sad though?

Maybe someone else would know. Someone who knows about everyone.

Like the bartender. Ask why Gottfrid is so sad.

That is sad. Tell to Gottfrid you can help to find his boy.

So, Hansel, his son, was lost somewhere near the mill. Go visit the mill, again. Now, there is smoke coming from the chimney. Go knock on the door.