To begin the Ice Beast quest, you must be level 8.
Jadespear or Ironheart will send you to see Blood, who resides in KaMing's Encampment (who also allows you to get a Blood Oath with someone), who is said to be able to forge a weapon made out of ice.
When you get to Blood, ask him about the "Ice". An Ice Heart is required to forge the Frost Sabre, which is obtained from an Ice Beast. He will tell you about the Ice Beast, and how it's semi-immortal in the fact that he is reborn every so often. Don't let this get you down, because remember: you're much smarter than both Blood and the Ice Beast.
Blood will ask for 100 coins to forge the sabre. Once you give it to him, he will laugh at you saying that he got an easy 100 coins.
Next, go to a potion shop and pick up a bottle of Aged Wine (150 coins), it'll be used in the next step.
Blood doesn't know where the Ice Beast resides, but fortunately we do! Go to Dae Shore (East of Kugnae), and once inside, go directly West to the very edge, where you'll see a bridge at the edge of the map. When you go in there, you'll be in Northern Koguryo - home of the Ice Beast!
On the Eastern side of the map, you'll see a moat of lava around an icy area, where you should see an Ice Beast (or sometimes two). How do you get across? That's where the Aged Wine comes in.
Talk to the Hermit that is at the Northwestern part of the map, and he'll ask if he can have your Aged Wine. If you agree to give it to him, he'll give you a pair of Traveling Shoes in exchange.
Now, to cross the lava, go to a spot where there's a little penninsula jutting out of the land, at the bottom, close to the Rock. You can cross there, and begin to hatch your plan of killing this beast.
Do something to grab his attention, then keep about 2-4 squares away from the beast, until you know he's following you (he'll sometimes say "I'm coming to eat you!"). Go back towards the path you took to come across the lava in the first place. When the Ice Beast tries to follow you there, he is consumed by the lava and dies, dropping his Ice Heart.
If you want to keep your Traveling Shoes, pick up the Ice Heart and immediately use Gateway to get out of there. If you cross back over to the land again, your shoes will burn up.
Go back to Blood's house in KaMing's Encampment, and give him the Ice Heart by saying "Ice" to him. Even though he's very surprised to see you alive, he will follow through in his promise to forge you a Frost Sabre.
You recieve 2300 experience and recieve the Frost Sabre, as well as a nifty Legend mark, "Defeated the Ice Beast (Yuri ??, Season)".