As I started reading "The Birth of the Hound," the plot of the story reminded me on those old fairy tales your grandparents would have told you when you were young. I got a feeling like there was a huge life lesson to be told. Houndal, although rather vain, did actually stick to his guns and didn't open the bag (like I expected him to do!) He had a lot more restraint than that. I was surprised that it was the barmaid that opened the bag, and she turned into a Hound. It makes me wonder what Houndal would actually turn into.
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I was a bit confused at the end when Houndal was sort of talking to the dog. He was asking its name, but surely he would know the name of the dog because it is his boss, the barmaid, whose name you never find out. Maybe I'm missing the point haha!
One minor spelling error. When describing the tiny little man, you described him wearing a "grey suite," instead of a "grey suit." Don't worry, I do this all the time ;)
Pretty intriguing so far, keep it up!!