The cave is dark and gremlins are damaged by the Light spell and wands of light. An amulet of light, a torch, adequate castings of the Light spell or many wands of light are necessary simply to see and navigate the cave. The spell or wands can also be used to kill gremlins. If the PC is fairly buff, the Gremlin Cave can be used to train weapon skills, since a potentially infinite number of gremlins will be generated. The Gremlins will eventually become too experienced to contend with.
Since there are a potentially endless number of gremlins available, it is also possible to use the Pick Pockets skill indefinitely. This will both train the skill and satisfy Yergius regarding the PC's proficiency as a thief. Bear in mind also the always-present possibilty of pickpocketing a truly outstanding item. While it is very rare, artifacts have been pickpocketed this way.
The fluff balls found here are portable "gremlin bombs" which have received a lot of attention because of the possibility of pickpocketing indefinitely. On exposure to water, they turn into a gremlin, which then multiplies from the same water source. Bringing them underwater is interesting. ;-)
Note that it is in no way necessary to enter this cave to complete the game. It is simply a source of an expendable artifact which can be sacrificed, given to the demented ratling or sold. The climbing set is also useful of course, especially if the PC has missed the opportunity to enter the Pyramid.