The march to the Red Palace
With all three swords now in your possession, it may not be so clear where you need to go now. There was an island that you passed early in the game that had no visible means of access. However, if you return to the island just above the entrance to the skeleton maze from the very beginning of the game, along the southern coast of the main island, you will find that a bridge will suddenly appear as you get close to the land that leads to the small island. However, in order to get here, you will have to make the return trek from the last dungeon that you cleared, meaning you will have to travel back through many zones and many tunnels in order to reach your destination. There's one bit of good news though. With all three swords, you now have the ability to utilize the power of the Hadouken. Whenever you enter a zone or a tunnel, pause the game and press until you select the Hadouken sword icon. Now every time you swing your sword, waves of energy will be thrown at the enemy, crushing many of them before they can even approach you. It even has the ability to break down barriers like the Rock Sword. This will certainly make the return trip a little less agonizing. Once you approach the island and the bridge appears, cross it and advance to the red palace.
Enter the white palace
When you enter the red palace, you may be surprised to find yourself in a very typical tunnel battle with club wielding demons. Even at full strength and using the Hadouken sword, some of these demons will take two hits to defeat. However, this tunnel should prove to be no challenge to you. Just make sure that you exit the tunnel with full health. Double back and fight more demons if you need to obtain spirits. This is your last chance to refuel before you go into battle with the final boss of the game. When you exit the tunnel, you will be atop the mountainous valley with access to the white palace that you could see earlier, but could not access. Simply walk through the small maze to reach the palace and enter. It's a very wise idea to make sure you have a vial of Medicine with you before you enter the white palace, as it is surely better to use it and survive to the end of the battle than to die and have to start over from the beginning.
The Dragon Master
You will be immediately engaged in a boss battle as soon as you enter the white palace. This battle consist of a fight with the Dragon Master's three forms; a magician demon, a tall warrior demon, and the Master's true form, a dragon composed of skeleton parts. As soon as you defeat one form, he will transform into the next. It is possible to make it all the way to the final form while taking very little damage, and that is what you should aim to do since the final form is the most dangerous, and you will need as much health as possible when you face it. The first form, that of the magician, teleports around the room throwing fireballs at you. He doesn't throw them very rapidly, making it possible for you to dodge them most of the time. Continue to swing the Hadouken sword at him in which ever direction he attacks from. He will soon transform into his second form, that of the tall warrior. The warrior carries a shield which has the ability to block and reflect the power of the Hadouken. He also throws knives at regular intervals, although these knives are considerably weak and shouldn't hurt you very much. Because of the shield, and because the knives aren't much of a threat, you should attempt to fight this form at very close range, which should permit a few of the waves from your sword to slip past his shield and hit him. By attacking frequently and at close range, you'll take a few hits from the knives, but you should defeat him in very little time.
At that point, he will transform into his true form, the giant dragon composed of skeleton parts. He has a large red heart visible through his rib cage. This is the only vulnerable point on his body. Fortunately, you will have no problem hitting it with the Hadouken sword. What you must watch out for, however, are the fireballs he spews and the outstretched arm that he tries to attack you with. You will be safest against the left side of the screen. He cannot reach you with his arm at that distance. However, you will still have to dodge the fireballs occasionally, and you should move to the right only when necessary in order to avoid getting hit. It will only take a couple of fireballs to kill you. As soon as your health dips below the half mark, use the Medicine to restore it. As long as you both dodge the fireballs, and stay out of reach of his arm, you should be able to pummel him with waves from your sword until he is finally defeated. At that time, you will be treated to the ending of the game and the closing credits. Congratulations.