When you first get here you'll notice pretty quickly that something's wrong. Izumo's really down at the moment, and surprise surprise, you're going to be the one to make it better.
You can use Cyclone on the large patch of weeds to the bottom-right of the town for 2 Antidotes. To the left of the large patch of weeds, is a house, where in one of the wooden boxes you can get a Festival Coat, which gives you a whopping 10 Luck. You can net yourself a Water of Life too, by jumping onto the rock behind the Inn, and following the path all the way to a jar concealed at the very top of the area behind some trees.
The weeds near the houses in the top left of the village have a Lucky Medal under them for the taking. Going in the left of these two houses will show Kushinada, who is the next "sacrfice" for whatever evil lurks on Mt. Mikage. However, it is prophecize that a hero will come and kill the great serpent. Don't worry, this will all make sense soon - if you don't get the story whilst you're here.
You can break into people's minds with Mind Read to find out more, but once you're done use the all-purpose shop, Inn and Sanctum if necessary (if you're having trouble finding the Sanctum, it's the hut at the top of the stairs). The Reveal symbol at the top right of the town holds a combo tablet, but until you've been to Gaia Rock and got the special Psynergy from it, you can't do anything down there, so ignore it for the mean time.
When you're finished, head out of Izumo and go around the mountains on the island to reach Mt. Mikage. It's the familiar-looking brown rock on the other side of the island.