Maybe I'm silly for not catching onto this, but...

After you kill the Avatar of Hakkar[which you summon by using the egg] he drops ""Essence of Hakkar."" Pick that up and right click it in your inventory to fill the egg with the Essence of Hakkar.

Set your looting to ""Free for All"" to have 1 person gather the Bloods needed for the encounter. Once Hakkar is summoned, change it back to Master-Looter.

This is part of a long chain quest designed to familiarize you with Zul'Gurub and the Zandalar Tribe. Much of the rewards are decent for their level. The Faded Hakkari Cloak is only slightly worse than everyone's favorite Hide of the Wild. Definitely a worthwhile chain for someone that doesn't want to shell out for the Hide.

Here's the full quest chain:
- Screecher Spirits(Feralas) - https://vanillawowdb.com/?quest=3520 https://vanillawowdb.com/?quest=3520
- The Prophecy of Mosh'aru(Zul'Farrak) - https://vanillawowdb.com/?quest=3520 https://vanillawowdb.com/?quest=3520
- The Ancient Egg(Hinterlands) - https://vanillawowdb.com/?quest=4787 https://vanillawowdb.com/?quest=4787
- The God Hakkar(Temple of Atal'Hakkar) - https://vanillawowdb.com/?quest=3528 https://vanillawowdb.com/?quest=3528
- The Lost Tablets of Mosh'aru(Eastern Plaguelands) - https://vanillawowdb.com/?quest=5065 https://vanillawowdb.com/?quest=5065
- The Final Tablets(Lower Blackrock Spire) - https://vanillawowdb.com/?quest=4788 https://vanillawowdb.com/?quest=4788
- Confront Yeh'kinya(Tanaris) - https://vanillawowdb.com/?quest=8181 https://vanillawowdb.com/?quest=8181
- The Hand of Rastakhan(Stranglethorn Vale) - https://vanillawowdb.com/?quest=8182 https://vanillawowdb.com/?quest=8182

actually need to make a correction, seemed like a good tip before I did the encounter, then when we went to start it, realized this was not true. You need to use the egg in the room where the skeleton of the avatar is in order to start the encounter, and then the mobs start spawning. Unless it was meant that you need to clear all the mobs around the area.

This encounter is VERY hectic if you aren't well organized, so make sure you brief everyone before using the egg.
Change the loot to free for all(thanks to the second post) and make sure one person is in charge of getting the blood and extinguishing the torches. The blood drops from wyvern looking creatures called Hakkari Bloodkeepers(https://vanillawowdb.com/?npc=8438 https://vanillawowdb.com/?npc=8438) that spawn one at a time. there are also several non elite venom spitters running around, that will quickly target your priest/healer, so have at least one person assigned to pull these off of them. Also, during the encounter before Hakkar is summoned by putting out the four torches, there are elite dragonkin called Nightmare Suppressor's (https://vanillawowdb.com/?npc=8497#00Rzc https://vanillawowdb.com/?npc=8497#00Rzc) that spawn and try to prevent you from summoning the avatar, they also start a ""drain soul"" like animation on the Avatar, but I didn't really notice if it was doing anything with all the other mobs around, sorry. But if you see them doing the drain, a quick attack is all that is needed to break the action and have them target you, then it is just a regular elite fight.
One last thing, make sure everyone is ready and aware before the person with the blood goes to put the last torch out, because as soon as it is extinguished, the once ghost-form of the avatar hovering in the center of the room comes to life and starts pounding on the nearest target, so make sure your healer/ mages, or any other cloth wearers are well back. And this also gives you a chance to change the loot back to group loot before having to face the big guy (something I wish I had done) He drops some nice Rare BoP items, and it is kind of a bummer to have someone accidentally loot it without realizing it is still on free for all. Good luck and hope this makes the encounter a little easier for anyone else.

PLEASE NOTE - If you wipe during this encounter, you will NOT be able to do it again until the instance is reset.

After you turned in the quest and talk to the NPC again, you can optional take another item.
He hints that you need to kill the avatar of Hakkar again.
I haven't done this part since it doesn't really appears to be a quest.
Does anyone know what's it about?
The item you get is: https://vanillawowdb.com/?item=10818 https://vanillawowdb.com/?item=10818

This quest does NOT count for the http://wotlk.aowow.org/?achievement=1678 Loremaster of Kalimdor Achievment.

Simplified version of all this:
1.Kill the prophet Jamm'al and his friend.
2.Go to the rom with the big dinosaur bones in the cult-candle circle.
3.Right click the EGG in you bags, and kill everythin that spawns.
4.While fighting/healing: Loot the spawns that shoot Shadowbolts at you ( while fighting/healing. )
they drop blood of hakkar.
5.Run to the Lamps in the corners and spend 1 second at them after right clicking.
go back to killin crap.
6.Repeat until all 4 lamps have been put out.
7.Loot the hakkar dude. ( need/greed/pass )
8.hand in all quests.
9.have fun.

Easiest way in and out if you're only here to do this quest:

After entering the instance, head to your immediate left and climb a spiral stair. This will take you up to a level with green drake type enemies. Northwest and southwest lead to a rectangular room where the event takes place. Use the egg you were provided to start the event. You're locked in, so make sure all group members are inside before the event starts.

During the event, loot the blood from the bigger elite add with 'blood' in the name, then put out the torches, total of 4. They'll spawn periodically. Otherwise it's 'kill the infinite adds' kind of fight.

After the 4th torch is put out, the adds stop spawning, but anything remaining will not despawn. Kill the remaining adds, then just tank and spank.

The boss drops an item that you right click to actually complete the quest objective.

To leave, go back out to the main room with the green drake type enemies and leave via the north entrance, this will take you right back to the exit again.

Make SURE you fill the egg while still in the instance as it requires ""Sanctum of the Fallen God.""