On October 25, 2003, about 0840 eastern daylight time, an Aerostar RX-8, hot air balloon, N3597H, received minor damage during a hard landing in Ithaca, New York. The certificated private pilot and one passenger were not injured. Two passengers received serious injuries. Visual meteorological conditions prevailed for the personal flight, which departed from an open field in Ithaca, New York. No flight plan had been filed for the local flight that was conducted under 14 CFR Part 91. According to the pilot, he was taking three friends on a balloon ride. He said that he checked the weather the night before the flight, and again on the morning of the flight. Upon arrival at the launch field, the pilot released a pilot balloon (PIBAL), at 0705. The winds were higher than he desired, and he waited. He released a second PIBAL at 0730, and although the winds had lessened, they were still stronger than he desired for flight. He released a third PIBAL about 0750, and the winds were satisfactory for flight. Prior to takeoff he briefed the passengers to flex their knees upon touchdown, and to face in the direction of travel during landing. The balloon was inflated, and he took off about 0805. About 15 minutes into the flight, the winds increased, and he started to look for a place to land. He aborted on his first landing attempt and picked a second field. After clearing trees and power lines, he continued to descend for a landing. At an altitude of about 10 feet, he vented the envelope. The balloon hit hard in a grass field, and the basket laid over. The basket was dragged for over 300 feet, and then became airborne as it neared a tree line. The balloon impacted a line of trees with the basket about 15 feet above the ground. The pilot and passengers were able to exit the basket to the ground. The pilot added that the injuries occurred during the initial touchdown. The closest weather observation to the departure point and accident site was Ithaca Tompkins Regional Airport (ITH), Ithaca, New York, which was located about 8 nautical miles from the departure point on a bearing of 65 degrees magnetic. The 0750 weather observation from Ithaca included winds from 180 degrees at 10 knots, and the 0850 weather observation included winds from 180 degrees at 10 knots, with gusts to 18 knots. A check of the terminal forecasts for Ithaca revealed that the winds were forecast to remain at or below 10 knots at the time of the accident flight. The first terminal forecast with winds greater than 10 knots was released at 0700, and effective at 1112. The forecast called for winds from 180 at 12 knots with gusts to 20 knots. The pilot reported that his total flight experience was 43 hours, all in hot air balloons, including 31 hours in make and model.