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Hide from the shy guys with Bow in the empty house (the house is the one at the leftmost point of toad town. The house is in the area next to the area with the harbour and has paper near the door) and watch them go through the secret door to the toy box.
Get a toy train from the shop keepers' store room after returning his store room key. Throw the train into the toybox, before you enter.
Go to the right and get the cooks frying pan from the chest.
Return the pan to Taste T. and get her special cake.
Feed the cake to the Gourment Guy for the cookbook and access to the other side of the tracks.
Take care of the guys to the right, don't worry about the dark room yet. Then take care of the guys to the left, don't use the party upgrade yet.
Before entering the next room get recharged and save in the main room. Boo slaping the lantern and Multibouncing the ghost seem to work best.
Use the team member upgrade on watt.