So, you have chosen to capture the soul of a felhound, good. Take this ruby--with it, you will be able to capture the creature's soul. It works very similar to spells you already know: when the creature is close to dying, use the gem and it should do the rest of the work for you. I would suggest going to Desolace and trying your hand at any of the felhounds there. Those should do nicely. After you're successful, take both the captured spirit and your ruby to Menara.