The Quest/Full-spoiler solution

The castle provisioner
Two items are necessary: buy a waterskin and a lantern.

Also, this is the only place in the game where you can buy a cartograph (chart-graphics, i.e. a map). Look at it, and remember that north is to the left.

Next step: find a water source. Leave the castle, then turn west at the crossroads. Keep going west until you reach Balema Bayou. Here, you can get water and refill your waterskin. Read the sign carefully: if you get into the lake, an alligator will eat both you and Gorn (and this is how you learn the "Balema Bayou" name).

Learn dragon language
When you will meet dragon, you will soon learn that brute force is useless. Learn its language, so that you can communicate. This can be accomplished in three ways: choose your favorite one, or do them all.

From books
Before leaving the castle, ask the castle provisioner about books. Purchase "Lingua Draco Flameus", but if you try and read it, you will discover that it is Latin.

Therefore, also purchase "Pig Latin Made Simple" and read it: you will be able to understand the other book, and learn "dragonese". The two books cost a total of 50 Gold Sovereigns.

From the hermit
Leave the castle, go west, then south, then east, until you find a hermit's cave. From Balema Bayou, go back east, then south, then west.

Ask anything to the man, and he will in return ask some gold before revealing any useful information. Pay him 51 Gold Sovereigns, and he will reveal everything he knows, as well as teach you "dragonese".

With Lisa
Leave the castle, go west, then south, then west, and you will enter a swamp. From Balema Bayou, go back east, then south, then west.

Notice the skeleton to the south: upon a closer inspection, Gorn will notice a ring on its finger: get it.

Keep going west, then go north instead thus avoiding ruins. When you reach a road, go west. Knock at the house door. If you got the ring, Lisa the sorceress will agree to join you.

Instead of teaching you the dragon language, she will translate when you meet it.

Going north

 * The brigands
 * The north provisioner
 * The desert