Actually, I think imBanner made the same mistake I did. The bears are actually IN the city to the Northeast (I just found them). When he said to kill the dire bears to the north of the city, and I had seen dire wolves roaming around on the map, I assumed I had to leave and ACTUALLY GO NORTH OF THE CITY. Then I saw the bears in the cave and assumed those were the ones I had to kill. In actuality, at this point, you don't need to enter the cave to get the 3 pelts.