This part is easy. Just haul all of your bugs that youve collected in towns (or bought) to Moira's store in Durem. There should be a link /within/ her store that will take you to the
Bug Exchange. (right now it isnt visible, but it's there @_@)
The inks are used to dye the wrapping paper on regular and deluxe flower bouquets.
You will need 50 of a certain color bug to make 1 ink pot (fireflies and cicadas= black ink, crickets= brown). (THIS EXCLUDES THE RARE BUGS) This means that if you have 50 grashoppers, you are able to make 1 green ink pot. When you have enough bugs to make a certain color ink, Moira will display that ink in her 'exchange offers' section. Clicking on the color of ink that is possible will take you to the exchange screen.
On the exchange screen, there are two areas.
Direct trades are when you have enough bugs to make the ink without having to choose which bugs to deduct. This area also displays when mixing inks to make others is possible.
Multiple Item Trades are when you want to use one type of bug over another or want to combine bugs to make a certain color ink. Some inks not available through mixing, or require tons of the other inks to mix.