The Flute dismisses the River Devil and reveals the Hidden Palace; the fifth Crystal grants a free level-up.
Optional
A point bag waits at a dead end on the ocean route; several palace side branches contain point bags or red potions.
Missable
The Flute must be collected before the palace seals. Heart Container #3 remains available outside afterward.
Numbered 100% route
From the narrow sand path southeast of Nabooru, use the Boots to walk onto the ocean. Probe north while heading toward the palace to find the hidden spur.
Follow the hidden water path east and collect Heart Container #3, then return to the main route and enter the Palace on the Sea.
Climb the opening stairs, collect the first Key, cast Fairy to reach the high ledge, and immediately double back for the Key behind the transition.
Cross the collapsing bridge, descend to the first major fork, and take the left route through Sorcerers and falling blocks. Let blocks stack so you can reach the Key.
At the next fork, take the left progression route, collect the point bag above the elevator with Jump, and clear the lower left side room before heading right.
Take the Key from the Red Iron Knuckle, pass through the long Bubble-and-Sorcerer corridor, and jump through the false wall behind the Blue Iron Knuckle.
Descend, unlock the guarded treasure room, defeat the orange and blue Iron Knuckles, and collect the Flute.
Backtrack through the false wall, sweep the remaining western and vertical branches for Keys and supplies, defeat Gooma, and place the fifth Crystal.
Boss strategy
Cast Shield first and reserve the remaining magic for Life; Gooma's mace inflicts heavy damage even through defense.
Step close enough to slash his body, then jump away as the mace extends.
Be patient. Trading hits is much worse than taking one safe opening at a time.