After you defeat the cops, they let you go south to Twoson.
To go to Twoson, go south from the arcade and continue going south along the path. On the way, there is a house where some Exit Mice live. An Exit Mouse can be kept like an item, and when you use one, it takes you instantly to the exit of a dungeon. You can only use one in a dungeon. Feel free to get one now.
Go to Twoson
Close to Twoson, you might encounter some Ramblin' Evil Mushrooms. They aren't very dangerous, but they can scatter spores, which causes a mushroom to grow on your head. This can make you feel strange during battle, which can confuse you into attacking yourself or your allies. Outside of battle, having a mushroom on your head can make your controller directions randomly become rotated or mirrored. To cure this condition, go into any hospital and talk to the blue-haired guy in the lobby. He will buy the mushroom from you, curing the condition.
You can go back to the Onett hospital if you need to get rid of a mushroom, or you can try to make it to Twoson and visit the hospital there.
There is a Hamburger on the way to Twoson.
In Twoson, you might encounter New Age Retro Hippies, Unassuming Local Guys, Annoying Old Party Men, Cranky Ladies, Mobile Sprouts, and Ramblin' Evil Mushrooms in the outskirts of town.
In the hotel, talk to the guy sitting at a table outside of the hotel rooms. Keep talking to him until he gives you $50.
If you go near the entrance of the bicycle shop, a photographer will drop down from the sky and take your picture.
Go into the bicycle shop to borrow a bicycle, which lets you ride around quickly. Press R while riding the bike to ring the bell.
If you go toward the front door of the Chaos Theater, the Photo Man will come down and take your picture.
The first time you call Mom, you will also learn about Escargo Express.
There is a stronger weapon you can buy in the Department Store, but it misses 18.75% of the time, so you should probably stick with the Tee Ball Bat for now.
After Ness reaches level 16, there is a small probability (about 1%) that he will become homesick after battle. If Ness is homesick, he has a 1 in 8 chance of losing his turn in battle each turn. Outside of battle, the only way to tell if Ness is homesick is to look in his status menu. Call Mom or talk to her in person to cure Homesickness if it occurs. Contrary to popular belief, having a Chick in your inventory does not cure or prevent homesickness. When Ness reaches level 76, he can no longer get homesick.
Find out about Paula's Kidnapping
Go to Polestar Preschool to learn that the owners' gifted daughter was kidnapped. Go upstairs to get a Teddy Bear. You might want to call Escargo Express and have them store the Teddy Bear for now.
Visit Burglin Park
Your next stop is Burglin Park, where Everdred watches over things from his roof. Talk to the grungy kid and buy the For Sale sign from him. This is a useful item that lets you sell anything, no matter where you are (except for a few places where the sign won't work). Also, you can buy fresh eggs from the tough guy. These will hatch into Chicks if you wait long enough, and the Chicks will eventually grow into Chickens, which you can sell for a considerable profit. If you have a Chick in your inventory, you will hear a chirping noise in the background sometimes. If you have a Chicken in your inventory, you will hear a clucking chicken noise in the background sometimes.
Be sure to buy a Copper Bracelet from the dreadlocks guy in Burglin Park.
Fight Everdred. Or Not.
You don't have to fight Everdred, but you can if you want to find out where to look for Paula. Or you can just read this walkthrough to find out. You get 986 Exp and $171 if you defeat him.
If you do want to fight Everdred, be sure to call Escargo Express and give them anything that you don't want to get stolen. You might also want to bring a Teddy Bear. As mentioned earlier, there is a Teddy Bear in Paula's room upstairs in Polestar Preschool.
When you're ready, for the battle, go all the way to the left side of Burglin Park to find Everdred's house. He will leap down and fight you before talking to you.
Keep your HP above 50. Having a Teddy Bear will help reduce the damage to you, and it can also reduce the chance that Everdred will steal something from you.
You can defeat Everdred by using PSI Rockin α three times. Be prepared to heal in case Everdred inflicts mortal damage.
After you defeat Everdred, he tells you that Paula is in Peaceful Rest Valley. Everdred also tells you to visit him after you rescue Paula. Don't forget!