@Sentinel
I don't think I play the kinds of video games you're referring to. My risk assessments when evaluating means of dealing with the goblins are more based on their description in the Old World Bestiary and wider Warhammer lore concerning Greenskins. To wit:

Quote Originally Posted by OWB, p.23-24
Goblins...are, in general, a miserable treacherous race of petty thieves and vicious cutthroats... Night Goblins are essentially very similar to ordinary Goblins, though they are even more vicious.
Quote Originally Posted by OWB, p. 23, "Common View"
"You've never seen anything crueler than three Goblins torturing a wounded deer that had caught its foot in their crude trap..."

"They trampled my herb garden, just for sheer devilment. I think they're even wors than Orcs - getting bullied all the time by bigger Greenskins gives them a real vindictive streak. I wanted to run out and show them the error of their ways with my staff, but there were a dozen of them and only one of me so I stayed hid in my cave."
To me, this reads as goblins being extremely violent, untrustworthy, and willing to commit acts of needless cruelty just for the sake of it. They're also not much into long term thinking (a common Greenskin trait), so they're apt to act on their baser instincts just because they see an opportunity. Are there exceptions? Yes, but that is likely to occur at leadership level and we have no way of knowing that this will apply to this particular group.

If I were a night goblin leader in the situation we're in, I'd see a small group of humans who are massively outnumbered by my warriors. If they want to talk, I'd be inclined to let them until I was ready to rush them. Why would I do that? Because I can. Because it would be eight more humans for the stewpot if I don't end up sacrificing them to the wyvern. Because it would be hilarious to torture someone bigger than me. Because we might have shiny loot - lots of reasons that make no sense to our characters, but are perfectly reasonable to the goblin mind.

As for the terrain being advantageous, I'm afraid I disagree with that. There's four walkable routes into the hollow, not counting the ravine itself. Unless Elsa can maintain multiple walls of fire at once, I don't see how we can quickly prevent the goblins from swarming out of the hollow if it comes to hostilities.

None of this means that diplomacy is impossible, but I really think we would need to have a plan to address the two points I made earlier, as well as a very strong opening offer that will convince the goblins to talk and not just come at us for the reasons outlined above. I.e. we would need to think more like goblins and less like humans to get them to listen to us.

@LeSwordfish
You may be right that a large number of the goblins will leave the hollow once night falls, but don't you find it odd that "scores" of night goblins are resting outside in daylight in the first place? There's must be some sort of cave behind where the waterfall used to be - why aren't they using it to hide from the sun? I see three possible reasons, two of which give me pause:

1. The goblin chief has appropriated the cave and isn't sharing it with anyone. Possible, and not concerning in and of itself.

2. The goblins resting outside are doing so because they're the ones who don't have enough status to be allowed behind the curtain. Ergo, there could be plenty more goblins hidden out of sight. If the outside lot do vacate the hollow come nightfall, it may just fill up with more goblins.

3. The goblins are gathered outside because this is a sacrificial site. They're waiting for the wyvern and expect it to arrive during daylight, which is why they're even bothering to hang out outside. This would mean we can't observe until nightfall and then act.

@TheSummoner
I'm currently inclined to believe that taking a prisoner is probably our best bet. It could be combined with a brief stakeout, but if that gives us no new information, we could try and draw away a small group of goblins, ambush them and try and get some firm intelligence from a prisoner or two.

@LCP
See my reply to TheSummoner above as far as a stakeout is concerned. (I.e. tentative support for a stakeout )