Note: If you do not have Force, do not bother about knocking over the log in Master Feizhi's temple, as you can't do it. Simply continue along on your quest, it will not affect your game in the long run.
It may not look like it, but the building just north of you when you enter town is an inn. Stop there and heal up all of your characters. Right away you should notice a Djinn on a cliff in the eastern part of town. In order to get this, you're going to need Freeze. Mia should have this if you equip two Mercury Djinn on her. Now, you want to talk to the girl walking back and forth between the docks and near the cliff. Where you want her is 1 from the top and 1 from the right in order to be able to jump on the pillar once you freeze it from one side of the garbage blocking your way to the other. So freeze it, go up the stairs and hop over to the eastern cliff. You won't need to battle this Mercury Djinn, Mist. Now, head back across the ice and into the building right there on the cliff. Here you'll see a tree stump surrounded by a white line. Get *right* up next to that white line without physically touching it and use force to knock it down. If you didn't hit the white line the door will open and out come Feizhi and her father, Master Feizhi, discussing her visions. They also mention that Hsu is late and Feizhi will run out to find him. Now, Master Feizhi will come over and make you use Force on the log again. When you do this Master Feizhi goes into a long conversation about how you use Chi from your mind (aka Psynergy) instead of Chi from you hand like him. All of this doesn't really do anything for you, as you don't get any items or anything important, but you do get a little more feel for the plot. Now, head to the weapons shop in the northwestern part of the town and buy the latest and greatest weapons. You're now done in Xian, so head out of town.