First, read here for the handy official guide, including what mobs are in your level range. I'm not going to repeat it because the basic mechanics are covered well here.
Step 1: Delera's Graveyard: Farming Mobs, Collectible Bits, Party Mechanics
The first phase of the event is gathering collectibles (cursed skulls, cursed fingerbones, and burnt-out black opals) to turn in to the Night Trader. 20,000 turnins are required to make the Spectral Dragon available. For 30m after each dragon is summoned (eg 40m after the chamber becomes open), turnins will not count to the next total. You may see the total number of bits required (or time until bits count again) by talking to Joe Lantern.
Turning in these collectible bits will also get you motes of night. Each has a different value (opals are worth the least) and how often you get each depends on mob level - higher level mobs drop more fingerbones/skulls and therefore more motes/time invested. Lower level mobs will drop more opals and therefore you'll gain motes much more slowly on a non-20 character.
In the graveyard, there are a lot (probably over a hundred) unique locations that can spawn undead. These spawn points will create more monsters when their cooldown timer is up and a player moves within a certain distance of them - players all standing still won't cause spawns.
Spawns are larger the more players are within range of the spawn point. The cap seems to occur around 12-14 players in the same area - after that, the spawns don't seem to get any bigger. At this point, many spawns are so large that they'll lag your client when they take damage. The nodes will spawn monsters based on everyone in their immediate vicinity, including players who's movement did not trigger them: This means the mere presense of someone of different level (even 50 yards away fighting their own mobs) can make a node you spawn create monsters above or below your level. This really encourages different level ranges to segregate as much as possible, either to separate sections of the instance or to separate instances entirely. Mixing level ranges makes everyone -far- less efficient!
Larger groups of players also make spawn points more likely to create red named (mummy avenger / vampire lord / lich) monsters. Spawn points regenerate every 30-60 seconds, semi-randomly.
All of these things give you good reasons to party. What reasons are there not to party?
Each monster has a set chance (not guaranteed, except for vampires/vampire lords/liches and their unique turnin ingredients) to drop a collectible bit. When you are in a party, this collectible will go to one party member at random, even if that person did not damage the monster. The range on this is very wide (over half the graveyard), as long as you are in the same instance. So partying may or may not increase your personal rate of collectibles gained, but it will increase the overall rate of gain (eg make the dragon come faster), as well as increasing chances at the red named spawns and their special stuff (especially lich dust). Even for the largest parties, a lich won't spawn more than every 5-10 minutes.
When you are not in a party at all, you gain an additional chance to gain a collectible from any monster you deal some (I don't know the threshold, but I'm not sure "I hit it once" is adequate) damage to. This is in addition to its normal drop and applies to all mobs. If you're a caster who throws a fireball and drops a bunch of stuff to 10%, and then someone else kills it, you'll have a separate chance to gain collectibles from all those monsters. This includes red nameds: I can personally verify that I recieved lich dust for a lich I did not kill while partied, and that I know the party member who recieved lich dust for the same kill. This is the only way to get more than one drop of these turnins from the red named monsters.
This means that soloing in the vicinity of a large party can be very profitable: as long as you can damage many of the monsters before they kill them (eg you are a cleric or caster too), you will gain a disproportionate amount of collectibles. This is the fastest way (faster than draughts of midnight) to farm motes of night, but may earn you the emnity of those large groups you are exploiting, because you are screwing them pretty badly. Most large groups will stake out 4-6 spawn points so that some of their members (especially people who are not casters or clerics) can simply go afk and get stuff. This does work, and they get considerable amounts of stuff this way.
Step 2: Spectral Dragon
FlyingTurtle has posted a useful guide here: http://forums.ddo.com/showthread.php?t=282573 This guide is complete with handy map and explaination of the objectives. I will only add/emphasize:
1: One self-healer wtih aoe abilities on each lever. A caster can cast 5 firewalls on top of the lever and basically go to sleep. A clericy type will have to bb kite, as the black gargoyles aren't undead. Melee have no purpose near levers. People near levers should be able to heal themselves, as the gargoyles are in huge number and respawn quickly, and melee for 40-50 pts in the lv 20 version. Incidently, soloing a lever not in party is a great way to make motes.
2: Everyone must attune their altars before the 10m window for people to enter the instance ends. Failure to do this results in immediate failure.
3: As a raid party, the easiest thing to do is assign one self-sufficient aoe user to each lever, and either another aoe user or a melee+someone who cna heal them combo to each altar room. Don't worry about stacking a particular room. The party doing the levers benefits from having at least one individual in each room to shout out dragon locations.
4: Firewall is god in the summoning chamber. The mobs are low hp, eternity takes double damage from fire as an undead, and it cannot harm the altar. A single caster can solo a whole altar room if it really wants to.
5: Eternity will automatically leave an altar room with too many people in it, so if your rooms are unbalanced in number he will always stay to hte ones with the least people. Ensure that the ones with few people have particularly self-sufficient (spare arcanes, or fvs+melee etc) pairings. Just 3 people can easily dps eternity down in about 3-4 minutes.
6: Eternity is an undead, not a dragon, for bane purposes.
7: Nothing in this entire process has true seeing, so abuse displacement and your lives become even easier than they might have been previously.
8: You can cast walls of fire through the bars down into the altar rooms from the lever locations. You can't select monsters to do this (you'll get an out of range message), but if you manually target the ground ther you can assist in killing spawns. In fact, one caster could probably manage spawns in both an altar room and the lever itself in this fashion.
Following the above, a 16 person instance isn't really necessary: You could do the entire encounter with 8 people, if all 8 people were self-healing arcanes. A whole bar dump from a level 20 caster will equate to around 25-30% of eternity's full hp.