Talk to the Mimiga near the warp point and you will be asked to go retrieve his house key. Follow the path until you see a small ditch surrounded by enemies. The mimiga's key will be in the center underneath the platform. Kill the enemies and grab the key. Go back to Santa and give the key back and he will invite you inside his house. Follow him and talk to him once he is inside his house. You will receive the Fireball for your efforts.
Head out again and follow the path until you reach Chaco's House, avoiding the pit trap. Enter her house and examine the fireplace. Chaco will then talk to you and tell you that an item called Jellyfish Juice is needed to put out her fire and proceed. Exit her house and go back to where you found Santa's Key. Jump onto the platform above it and shoot the Giant Jellyfish perched on the ceiling to initiate a battle. The fight with the Giant Jellyfish is really quite easy, just shoot upwards until it is dead. It might fly downwards and hit you, causing five points of damage, but it shouldn't kill you. After you defeat the it, it will drop a chest containing Jellyfish Juice.
Once you are back in Grasstown, go back and fight the Giant Jellyfish again to get more Jellyfish Juice. Go back to Santa's House and use the juice on his fireplace to receive charcoal, which you will need a little later. Go and fight the Giant Jellyfish for a third time to get even more Jellyfish Juice. Return to Chaco's house and pour the Jellyfish Juice into her fireplace to gain passage over the wall and into the second half of Grasstown. Head right but be careful of the numerous hidden pits and avoiding the mannan's attack.
Eventually you will fall down a wall that you cannot get back up. Keep going right after this, but save in the room above if you need to. Get past the mannans and you will see a house with a purple vehicle in front of it. Try to open the door to this house and you will see an icon appear over a crack in the side of the house. Examine this crack to start dialog with a mystery character. Agree to help them and you will receive a rusty key. Use the key on the rusty door, then go back and talk to the mystery character again. Head back to the ledge you fell down all the way to the left and use the key to go into the house located underneath it.
Go over to the computer on the left side of the room and turn on the power. A robot will turn on and try to attack you, but he will be crushed by Balrog. You will then have to fight Balrog again (strategy here). After you defeat him and Balrog runs off, examine the crushed robot. Pull him out of the ground and talk to him. He can make explosives! He will then ask you to get him three ingredients for his bomb: Charcoal, Jellyfish Juice and Gum Base.
Grasstown Part 2
When you leave the power room, you will notice that the fans are now on. Using the fans, go over the ledge and back to where the giant jellyfish is. Fight him one last time to get Jellyfish Juice again. Head back to the 2nd Grasstown area. This time instead of using Chaco’s fireplace, use the fan right outside her house to get over the wall.
Drop down to the locked house with the person inside and examine the crack in the wall to talk to him. He will give you the Gum Key. Use the fan to the right of the house to get to the abandoned house (Grasstown Hut) directly above it. Go inside and examine the bed to get the message “Red petals lie scattered on the ground...”, then open the treasure chest to get another missile expansion.
You will be attacked by a monster! Just shoot it with your Polar Star as fast as you can; don’t worry about damage much, as it can be taken down quickly. Exit the house and continue until you see a towering room with a skull above the door. Once you are inside the execution chamber, shoot the breakable block to the left, then immediately run to the far left. A block enemy will fall down, and if you are under it, you will be killed instantly. Jump onto the fallen monster then jump up to the next level. Kill the monster that didn’t fall down and jump onto the breakable block that it was on. Shoot the block above you and jump up to get the Heart Container. Drop back down and kill the only monster left to exit the chamber.
Continue to your right until you reach the far right side, where there will be a save point and a series of fans. It is strongly recommended that you save at this point. To make it over the gaps, jump at the very end of the platforms and hold forward--the fans will push you the rest of the way. Try to have as much missile ammo and health as you can before you open the door with your Gum Key, because it is your first serious boss battle. Also make sure that all your weapons are at level three.
Walk forward and open the treasure chest. Inside it will be the Gum Base. Misery and Balrog will come down and after a short chat Balrog will be turned into a frog. Defeat him (strategy here) and exit the room.
Go back to the robot and he will make you an explosive. Go to the locked door with the person inside it and blow it up. The person inside is revealed to be Kazuma, Sue’s brother, if you hadn't figured that one out yet. After talking to Professor Booster and Kazuma, save and then heal if you want and go outside after you are done. Booster and Kazuma will fly away. Go back to the teleporter at the very beginning of the level and warp back to Arthur’s house. Talk to Sue to trigger a conversation. Afterwards, save if you want to then go to the teleporter and warp to the Sand Zone.