Okay, it took quite a bit but I finally made it into the cave under the water. The problem I'm having is finding the place to put the explosives. It says in wiki that it is supposed to show a popup that says "This seems like a good distance to place the Ry'Gorr Explosive Mining Barrel." I've been through the mine twice and nothing like that shows. What gives?
The quest makes it sound like the barrel should be placed on the floor like a house item, but it may be something that you use from inventory. If you are not already doing it this way, try going to the spot shown in the wiki article and then "use" the barrel directly from inventory (right-click and use).