Whenever you are unsure on what to do next it is worth checking your Megatome as sometimes the thoughts of other characters can point you in the right direction.
Moon Grotto
During the full moon fall asleep by the hearth in the cabin to go to the dream world. Follow the Grizzled Boor when he appears to the titanic tree and enter it to fight him. Defeat him (do not kill him) and take the key and return to the 'Real' world. Go past the wall blocking the road to Mingi Taw, cross the stolid log bridge, and search for the hidden door below the trail in the next area. Use the key to open the door, once inside you will be able to manipulate the 'moods of the moon' at the bench.
Psychedelic Mushrooms
Collect Psychedelic Mushrooms by looking for glowing pixels on the forest floor and then use them to see secrets in the surrounding environment.
Regaining Health
To regain health, remember to hold the shield button during combat. This will give you health back, albeit slowly.
Summon the Sylvan Sprites
Perform the following tasks to summon the corresponding Sylvan Sprite.
Perilous Precipice:
Play the Song of Sworcery at this point and interact with the rainbows.
Stolid Log Bridge:
Play the Song of Sworcery at this point and interact with all of the trees by the river.
Sheep's Meadow:
Play the Song of Sworcery at this point and interact with the sky above the stick overlooking the meadow.