Zelda walks into your house, wanting to go to the picori festival. Eventually, you'll wake up and start playing. Walk downstairs, then to the door to the right. After a bit of talking you'll get the smith's sword. After some more talking, grab the 20 rupees from the chest, and follow Zelda, because it's the only thing you CAN do.
You'll arrive in Hyrule Town. Zelda runs to a man telling a story. Talk to her and she'll run over to another man telling another story in the upper left corner. Talk to her and she'll run over to yet another man in the upper right corner talking about a swordsman tournament. Talk to her and she'll run over to Pina (running the lottery in the lower right rug). Zelda wins the lottery! She could pick a heart-shaped stone (a heart container)…a magnificent gem (100 rupees)…and a teeny-tiny shield. Zelda picks the teeny tiny shield and gives it to you.
Go up to the next area (the two kids blocking the way will be gone). What a pain, Zelda gets hit by a business scrub. No trouble though, just keep out your shield and wait for it to try and hit you. Once the business scrub is hit, it'll go away. Poor business scrub…
Anyway, go north and head to the next area. Keep going north until you walk up to somebody (Minister Potho, in particular) and you'll give him the smith's sword. Zelda leaves but she was a bit of an annoyance… The picori sword is shown and… darn it Zelda came back (but with the king!)! Vaati, champion of the competition approaches the blade… But he wants more than to touch it! After four soldiers attacking him (and evidently getting knocked down), Vaati opens the chest and turns Zelda to stone! Unfortunately for Vaati, there was nothing in that chest except a pile of monsters.
Jump out of bed (by moving the pad to the right) and go to the next room (to the left).
After a bit of extra talking, the king tells you that only the picori can fix the blade, and that the broken picori blade needs to be taken to the Minish Woods. Potho says that the soldiers need to start searching for the picori immediately, but the king replies that only children can see the picori. Guess who needs to take the smith's sword and deliver the broken picori blade? YOU. The king mentions after you get the tools that you should start your search at Deepwood Shrine, and Smith marks the location for you. Head south to the next part of the castle, go around the wall in the middle, and go south to the next castle area. For the last part of the castle, again, head south.
Yay for south. Keep going south until you see road construction (killing octoroks on the way if needed), then head right and slash the trees with you sword. Progress to the next area.
On the way you'll see acro bandits (yellow mask except for blue around the eyes), beat them as they fall to the ground. Oh, and don't forget to head south.
Progress…south…until you get to a wall. At that point, go right across the bridge.