There is a Charm Slot on your Character picked up several different ways, bought with LDoN pts, Dropped by mobs, or by the affore mentioned Dwarf in PoK. These Charms work under certain "conditions". Example the one from the Dwarf gets better as u get flagged for the PoP planes.
Now to use the Adventure Stone from LDoN u must have obtained one of these charms and "augment" it. To Augment anything u have to have an Augment, go figure, and an item u want to "put it in". Now all u need to do if find the bird bath looking thing next to the LDoN adventure site and click on it. It will open up a container in which u will put the 2 items in and hit combine this will give u a new NO DROP item. Yes it will change a Droppable item to No Drop item.
Now to get an Augment out of an item u need to find a Solvent for the Type of augment u have, solvent type 1 for a slot 1 augment ect. Now that u have the 2 items find the bird bath looking thing again and click on it. Put the item and the solvent in the container and hit combine. This will return your item. BUT THIS WILL DESTROY THE AUGMENT. So be sure u want to do this. Now with the Adventure Stone, as mentioned above, All u need to do is hail the NPC that hands them out to get a new one - with the same stats as the one before - so u can put it into a new charm.
Hope this answers your questions :)