First heal and save, then go a screen to the left to meet the Queen. Talk to one of the guards and answer "Yes".
Enter the castle, head right and up through the door. Climb the stairs to the left or right and go through the center door, up the stairs to the left, through the left door, then head right to reach the throneroom. Talk to the queen, answering her questions two times with yes. Leave through the left door, climb down the stairs once, and instead of going back through the center door, climb the stairs down. Head left through the door two times to find a elixir, 3 life drops, about 200 gold, a Golden Bar, the terran medallion and a Pepelogoo egg.
To find out what the egg is, go back to the fountain you arrived near and use the egg on it. Wow! Talk to people around the town if you wish, and their comments will all change as they admire or envy your new pet.
Now head to the far left and enter the building. You'll see four tall doors—use the medallion in front of the far left portal to open the Terran Gate.
Head left as far until you come to a high ledge. Use your pet and jump twice to cross it. Continue to the left over the platforms until you come to a green arrow between two platforms. Again, use your pet to make it to the other side. Continue left until you find another Life Drop—use Pepe to reach the upper left.
Follow the path and defeat the ogres, then open the chest to receive a bomb. Use it on the blocked door, then head through it. Defeat the next Ogre to reveal a chest. Use the bomb inside on the door. Head on into Handera Volcano.