from the rulebook-
After reading and following any instructions on Side A, players flip
the card to Side B. Side B contains the information
necessary to move to the next stage of the quest.
reading this that means set up them immediatly flip
however i would say it goes like this-
set up quest according to 1a
draw your 6 start cards
then flip and follow out when revealed effects
now ive actually been playing it either way which may not be really correct, however given that i know each quest by heart and i take mulligans only if i dont like my start hand, and dont take the set up encounter card into account, i dont think it really matters. i set up the quest draw the cards and reveal 1b all pretty much after each other
the only time i can see it effecting is that if you flip before you draw 6 cards, dont like what you see when comparing player cards to the encuonter card, then take a mulligan thus meaning youve 'peeked' and cheated...however as ive said i dont take mulligans based on the revaled card