After you meet Luna, Jehk says that Sage Joch has gone to Tasnica. It's west-southwest of the Lofty Mountains. It looks like a palace with a dock into the sea.
Visit the Palace
Enter the palace in Tasnica. Just inside the entrance, you find Jema. He says that an Imperial Spy is in the castle, planning to attack the king. The quickest way to find the king is to go east from the entrance and go into the small door there, then follow the path until you reach a room with two guards in front of a wide staircase. Go up those stairs and through the double door at the top. Walk north to the king, who accuses you of being spies. Then the guard realizes that this is not the king at all, but the spy!
The Dark Stalker is very weak to Lumina. Just use Primm's Lucent Beam spell on it until it dies. If you have leveled up Lumina, you should only have to cast the spell one or two times.
After the battle, talk to the king. He'll snap out of it. Go up and talk to Jema, and the king will give you a Sword's Orb. Talk to Jema again and he will tell you to find Sage Joch.
You can explore the palace. You will see a dancing shopkeeper on a platform that seems inaccessible, but there is a secret passage in the bottom middle of this room, south of the brown counter. Go east through the wall, then north, then west, to reach the shopkeeper. Don't buy armor from him because none of it is any good, but you can get healing items from him if you wish.
Test of Courage
Go to the Lofty Mountains yet again and talk to Jehk. Finally, Joch appears. Talk to him, and Jehk translates his ancient language. Agree to take the test of courage. Go north past the stalagmites that disappeared.
There is a Nitro Pumpkin near where you enter. Get past it, then go west and north. Use the Axe to get rid of the stalagmites in your way, then continue north. There is another Nitro Pumpkin here, as well as a Shape Shifter. After defeating them, use the Axe to break through the stalagmites to the east, then continue east. There is another Nitro Pumpkin. Break through the stalagmites east of there, then continue south.
Eventually, the path splits. Go to the right. At the next split, go south. Use the whip to go across the gap. There are a couple of Nitro Pumpkins here, as well as a Marmablue. Keep following the path from here until the path splits. Go to the left. Eventually you will reach a new area.
Jehk will say that it is time for your test. Three doppelgangers appear: Shadow x1, Shadow x2, and Shadow x3. They look like dark versions of your characters. The Shadow Randi uses a sword, the Shadow Primm uses the gloves, and the Shadow Popoi uses the boomerang. Shadow Randi has 999HP and the other two have 800HP. The Sylphid Analyze spell says that they are weak to Lumina, but all magic only causes them 1HP of damage, and casting Light Saber on your weapons doesn't seem to make your weapons stronger against them. Just use your weapons until the shadows are defeated.
After the shadows are gone, go south to exit the area where you fought them. You'll automatically appear in the room with Jehk. You are told to go to the Tree Palace, which is on the island of coral. Go outside and go heal up if you need to.
Be sure to level up your magic. After the next boss battle, you won't be able to level up your magic for a while. If you don't want your new Luna magic to be stuck at level 0 for a while, level it up before you go to the Tree Palace.
The coral island is west and slightly south of the Lofty Mountains. If you have trouble finding it, fly above the Ice Country, then go northeast to find the island of coral. Land near the building in the center. Go inside to enter the Tree Palace.
Inside the palace, you find the Emperor. Since he has broken the seals on the Mana Seeds, he just needs to break the seal in the Tree Palace to make the sunken continent rise. Sheex, who was actually the Dark Stalker you defeated in Tasnica, asks for the chance to take his revenge. Sheex transforms into the Aegagropilon.
Aegagropilon is named after a plant called marimo (Aegagropila linnaei), which is a rare type of algae that grows into a ball.
If Aegagroplion casts Wall, you can get rid of it if Popoi's Shade magic is at least at level 4. The level 4 Dispel Magic spell will get rid of the wall. It can help to use Absorb Magic on Aegagropilon to stop it from casting Wall. You may wish to cast Moon Saber on your weapons so you can absorb some of Aegagropilon's HP with each hit. Thunderbolt and Earth Slide are the strongest spells against Aegagropilon.
After the battle, you receive a Spear's Orb.
Walk west to find the stairs up to the altar. Try to use the sword on the Mana Seed. Unfortunately, you are too late. Dryad appears and tells you to run. You convince her to join you even though Thanatos sealed her Mana magic. You'll hop on Flammie and watch the sunken continent rise. Afterward, land on the continent. If you look at your stat screen, you will see that you have no Mana Power anymore. You can still level up your magic to level 7, but not any higher than that.
Talk to Jema. He and his troops will try to prevent the Empire from capturing the Mana Fortress for their evil purposes. He tells you to find the ancient city under the palace, but since Thanatos is in league with the underworld, the palace is full of monsters.
Don't bother going into the door near Jema. There is just a dead end that way. Instead, go south down the many stairs and walk west through the water until you reach some stairs. When you are ready, go down those stairs to enter the Underground City.