The solution is this:

1: Get a sack of grain either from the cellar or the mill (I don't remember where)
2: Carry the sack to the mill and use the machine to shred it.
3: Go to the well outside, fill the bucket and combine the bucket of water and the shredded grain in your inventory.
4: Go back to the cellar and place the mixture inside the machine.
5: Talk to Zixzax


As for the dough, that's probably what you get when you use just one piece of grain and your mortar, then add water. You need to think bigger.