After you defeat Spring Beak and receive the Wind Seed's power, Popoi's grandfather tells you to go to Matango.
Open the Way to Matango
From the springtime area of Upper Land (with the pink trees) go west. There is a crystal orb here. Use Primm's new Analyzer spell (a Sylphid spell) to analyze the crystal orb. Sylphid's magic will unlock it, so have Popoi use Air Blast on it to remove the barrier. Go west after the crystal orb is gone.
Go north and use the west exit. There are Crawlers (green bugs) on the way, and they are very tough enemies. You might want to just avoid them.
Go north several screens. Eventually you reach a cave entrance. Go inside. There is a Kimono Bird that generates Pebblers. Cut the stalagmites with the axe and use the southwest exit to leave the cave. You reach Matango.
Speak to the King
Go through the village until you reach Fung Castle. There is an item shop to the left of the main entrance. Get three Wolf's Bands, three Fancy Overalls, and one Steel Cap. Stock up on Faerie Walnuts, which you can now finally get at a reasonable price instead of paying Neko twice as much.
Now go into the main entrance of the castle. Watts is just inside the castle entrance and can forge weapons for you. There is an inn to the right. Go through the door near Watts to find King Truffle.
After he tells you the legend of three heroes riding a white dragon, he'll say that you can reach the dragon's cave through the right-hand exit on the first floor (it's across from the inn entrance). He also says to take the treasures from the upstairs room, so go to the right of the thrones and go upstairs to get the Javelin's Orb.
Leave the throne room and have Watts forge your weapons. Then when you are ready, go to the right of Watts and use the southeast exit. This path leads to the dragon's cave.