Instructions
Go into the castle and take the door next to the first flight of stairs. This will put you in a new room on the next floor.
Climb down the ladder near the back of the room and turn the large wheel you find down there.
Climb back up the ladder and head into the blacksmith's room -- it's the one with the huge fireplace.
Climb down the ladder in the blacksmith's room and turn the second wheel you find there, then climb back up and leave the castle. Two of the obstacles will be gone, now you just have to deal with the drunk.
Go to the tavern and speak to the bartender. Purchase the "Good Spirits" item for 100g, then leave the tavern.
Talk to the drunk just south of the large fountain in town and give him the Good Spirits. He will leave, opening the way ahead for you.
Walk south of the fountain into the next screen, then take the southwest exit near the smokestacks. This will take you to the boat.