Trade with the Merchant
After watching a cut scene, cross the beach until you are facing water, and look to your right. There is another merchant there. Trade until you get the Exotic Flower, if he offers it.
Get a Piece of Heart
Next, get back to your boat and turn it in the opposite direction from where it is facing. There is a spiral-shaped island there that has a ramp at the rear of it that you can climb up. Go up and set the wind to NW if it isn't already. Jump off and use your deku leaf to glide between two sections of the island. There is a chest with a piece of heart in it on the right side in the cliff wall. After getting it, jump down and swim back to your boat.
Return to Windfall
Before leaving the island, go to the fish guy and get this place marked on your sea chart. Then set the wind to NE and set sail.
On the way to Windfall, you can find Tingle Island, which you can get marked on your chart. There is no need to stop there right now, though.
After automatically landing, head up the hill and turn right so that you are facing the bomb shop. Since the front door is locked, go around the side of the building, sidle across the ledge, face the back of the building, climb up the vines, and crawl through the hole.
Watch the scene, and pay special attention to the password that they say. If you forget it, just ask your boat.
Before continuing, check the postbox here because you might have a letter or two.
Use the Password to Enter the Pirate Ship
Now go up to the gravestone and jump onto the pirate ship. Talk to the door and enter the password, making sure to capitalize any letters that were capitalized. If you entered it correctly, you will get in.
You can check out Tetra's cabin if you wish. There are some interesting things on the walls.
Pass Niko's Test
Go down the stairs and Niko will be there with another test. When he is on the other side, hit the switch and start jumping across. You will sometimes need to hold down R and change direction in order to get there. Note that the ropes at the left of the room move from side to side, so don't be too hasty. Open the chest on the other side to get bombs. Then watch the scene.
Nintendo Gallery Note: There is no need to take a pictograph of Niko. You will get his figurine when you get Tetra's picture later.
Return to Outset Island
Now go above decks, jump off of the pirate ship, swim to the nearest shore, check the postbox, and walk to the pier. Your boat moved there automatically. Set the wind SW, and make your way to Outset Island.
You can get Cyclops Reef and Stone Watcher Island marked on your sea chart along the way.