Place the Stone Eye AF in the space directly above the Tower of Leires to create Lake Kilma. Enter Lake Kilma.
Talk to the penguins and answer them with “What?”. Then, head to area 16 on the map of Lake Kilma to find and defeat the Gorgon’s Eye.
Upon Completion: Return home, talk to Lil' Cactus, go downstairs (watch him write the Event on the leaf), and go back upstairs to save your game before continuing.