The presence and scope of the Enigma was not made clear until the protagonist visited Spellhold, the common name for the Residence For The Magically Deviant, an asylum located on an island north of the town of Brynnlaw. Introduced to the inmates there by a thinly disguised Jon Irenicus, one inmate by the name of Wanev proved to be the previous co-ordinator of the asylum. Still convinced that he was, if the protagonist spoke to him twice, the second time Wanev would give over a "memo" containing seeming nonsense, but actually a cipher, as shall be explained.
And yet, there was still one further step that needed to be taken in order to divine the Enigma. Speaking to Wanev again (perhaps many times) would just obtain a copy of the same "memo", but perhaps, very rarely, a different "memo" would be given, with a different cipher with a different key.
The first "memo" contained the following:
Qc terxepssrw evi jypp sj aiewipw. Mrjsvq xli Uyiir, ws xlex wli qmklx wlss xliq eaec. Livi ai ks 'vsyrh xli qypfivvc fywl. Ks qsroic KS!
Upon analysis, the cipher was revealed to be a rotation substitution cipher obtained from shifting of the letters of the alphabet four steps forward, and wrapping around to the beginning when the end was reached, as below:
When deciphered, this reads:
My pantaloons are full of weasels. Inform the Queen, so that she might shoo them away. Here we go 'round the mulberry bush. Go monkey GO!
The second and far more hidden "memo" contained the following:
Aqw vjkpm K co etcba, dwv vjga ycpv aqw vq vjkpm vjcv. K mpqy ugetgvu. Mggr vjg rcpvcnqqpu. Cnycau mggr vjg rcpvcnqqpu.
This cipher was also a rotation substitution cipher like the last, but the shifting of the letters of the alphabet is two steps forward instead of four, again wrapping around to the beginning:
And the deciphered message finally set in stone that this was indeed an Enigma:
You think I am crazy, but they want you to think that. I know secrets. Keep the pantaloons. Always keep the pantaloons.
Anyone familiar with Baldur's Gate 1 and the Golden Pantaloons would at this point wonder what would happen if the Golden Pantaloons were carried by them throughout the game, and what Irenicus would do with them when he found them on the protagonists' inventory, so this is exactly what I did, exporting my character from Baldur's Gate 1, and importing back into Baldur's Gate 2 while holding the Golden Pantaloons...
...and another phase of the Engima revealed itself. Very few of the possessions of the protagonist character from Baldur's Gate 1 will follow them into Amn: the items one will find that were present in Baldur's Gate 1 will be the same whether the character was exported or not, or holding them or not, with rare exceptions, and only in Irenicus' dungeon. As well, if the protagonist was holding the swords or armour of Drizzt Do'Urden, which were by far the best weapons and armour in the game, not only will the protagonist lose them when imported, but eventually Drizzt Do'Urden will be met after journeying from the Underdark exit map, and will be most displeased at this. Yet, the Golden Pantaloons do follow the protagonist, and can be found in the very first area: in Jon Irenicus' dungeon, behind a trapped painting in the room with the jailer golem, and can be retrieved within seconds of beginning the game.
Certain I was close to the solution of the Enigma, I was careful to obtain the Silver Pantaloons by the method mentioned previously, and reputation be damned. For the remainder of the game, I carried them with me, often keeping them in my main inventory rather than the Bag Of Holding for fear they would not be seen there should I talk to the critical character required to fulfill the conditions and bring the Enigma to a close. Nothing happened... at least until the Throne Of Bhaal expansion...
The Throne Of Bhaal expansion brought new hope that the Enigma would finally be solved once and for all, so a sharp lookout for Pantaloons was kept. Several powerful Bhaalspawn were felled and the game mostly completed, with none in sight. Yet on exploring the desert town of Amkethran, someone could be found who turned out to be the key figure in this Engima: a gnomish smith named Kerrick, who had taken up shop with Lazarus Librarus, originally from the now-wrecked Saradush, in the northwest, accessible by a tricky system of ladders not for those with a fear of heights.
Manning a machine like a steam press stuffed with fabric, he indicated that the protagonist should search for the remaining component. Three were required, which explained the inability of the protagonist to solve the Engima prior to this.
The next stop of the protagonist in the quest to eliminate other Bhaalspawn could be the lair of Abazigal, and the dungeons beneath. There, three humourous and inexperienced adventurers could be met. While initially petrified, damaging the hovering eyes nearby them would cause a mage named Iycanth to appear, offer a quest to retrieve the missing eyestalk, and then suggest "subcontracting" the job to the inexperienced adventurers. They could be restored with a single Stone To Flesh scroll (though usually three would be required, one per creature) and given the quest. They would return after a six-day wait not only with the required eyestalk, but also a pair of Bronze Pantalettes, a set of metallic underwear that was the final component to the Enigma.
Returning to Kerrick the Smith in Amkethran, he would then forge the Golden Pantaloons, the Silver Pantaloons, and the Bronze Pantalettes, for no charge in gold whatsoever, into:
The Big Metal Unit: A suit of armour, wearable by all characters, with a base Armour Class of -10, that gives the player the size and appearance of an Iron or Adamantite Golem.
The Big Metal Rod: A launcher for several types of ammunition
Scorcher, Pulse and Frag Grenade ammunition for the Big Metal Rod
And so is the fabulous Pantaloons Enigma solved, at least, until it reappears in Neverwinter Nights with a set of three-dimensional, bump-mapped, OpenGL-rendered Plaid Pantaloons to tease the minds of players everywhere.