The gallery below is a comprehensive, step-by-step, illustrated guide to the Terrace on normal mode, starting from the first pull and going all the way through to Kael'thas. First, some quick notes on group composition. In my opinion this isn't the hardest of the level 70 instances (that honor would go to Arcactraz or Black Morrass), so you don't need everyone to be group-specced or raid-geared, but it does help tremendously to have some crowd control available. The more, the better. And if you don't have much CC, you'd better hope you have a tank that can keep threat on multiple targets (might be a bit more difficult for Druids).
The good news is that the bulk of the mobs in the instance are humanoids, and can therefore be sheeped or seduced; traps also work well. There are also a few demons around that can be banished.
But before you can start pulling, you've got to get there. The Terrace is on the new Isle of Quel'Danas (IoQD); taxis from Ironforge and the Silvermoon City will get you there quickly for 25 silver or so. Or, if your realm has completed the quests to activate the Sunwell portal, you can port straight from Shattrath to IoQD. Once you get on the island, just ride east up the road to get to the instance. It's hard to miss, what with the meeting stone and big glowing portal and all.
Click on to the gallery below to see a picture of where it is on the map, and the rest of the walkthough.