Some people had trouble with keys in this chapter. If you need help on it look at the "Key Dilemma Walkthrough" below.
Go to the left house and talk to the man inside. Go up and find the arrow, use the grappling hook there. Go right and talk to the bird. Go back and talk to the man, getting the powder from him. Go back to the bird and give him the powder. Have the bird follow you to the right, when he walks next to some sections of the wall he will chop them down. Use this to get the large gem and the bug. Go back to the house and give the bug to the man. SURPRISE! You didn't kill the Wizard, he somehow pulled through! You will be locked up.
Dig through the brush on the floor until you get the key. Use it on the door to escape. Find the man who hid the key (in another now open house) and talk to him. You now have your sword again! Get the key and go into the castle. Search around for keys. (You'll have to walk back and forth a lot, again, if you actually need directions for this e-mail me and I'll post them)
When you get to the boss arena go right for a heart, then back to the main arena. Go down all the way and wait for the griffin. Neither you nor it may walk through the skulls. use this to your advantage by walking back and forth on the bottom of the screen slashing the griffin as it walks up. When it dies go into the room you got the heart in and hop down the hole as usual.
Key Dilemma Walkthrough
As far as keys in the seventh chapter, there are 3 key dilemmas. First you must get into one of them. Go to the arrow, use the grappling hook and talk to the chicken/axe. Go to the left-most house and talk to the man inside. Go back to the chicken and use the powder on it. Walk to the right and cling to the right wall by the bug until the chicken breaks it. When the chicken does, run in and get the bug. Go back to the left-most house and give the bug to the man. You'll be put into key dilemma 1, jail.
Dilemma 1: equip the shovel and dig up the sticks on the floor until you get a key. Use this to escape.
Dilemma 2: go into the right-most house (now open) and talk to the man who will give you the key to the castle.
Dilemma 3: requires a *lot* of keys, including key #2 which is an annoyance. Go back up the castle wall, but instead of going clockwise to the bird go counter-clockwise and you'll find key #2. Go inside the castle and follow the directions below for the rest of the keys (although you can probably skip this section, as they keys will be easy to find). Hidden items like key #2 are why you should use the compass on entering an area.
From the entryway: L=Left Game West R=Right Game East U=Up Game North D=Down Game South Key #?= This key will be laying in plain sight L Key #1 RRU (Ghost area) LU Key #3 DRD (Knight area) LLURUR Key #4 LDLUU Key #5 DDDRRU (Ghost area) RU Key #6 DLU Key #7 UL Key #8 RDDD (Knight area) LLURURRUL Key #12 D Key #9 URDDLLDLDRRU (Ghost area) RUU Key #10 DDLD (Knight area) RU
You are now through the key maze, going RU takes you to the boss. I have no idea where key #11 is, but it doesn't seem to be needed to make it through, or to get the parchment at the end of the stage.