Territory 4: This is a limited zone requiring the use of Xiao. Since Toan cannot enter this floor, there are no atla to be retrieved. Just fight as many enemies as you must to get a gate key, then take it to the owl and see if it is the right one. If not, keep trying till you get a key which will allow you to leave. Of course, if Xiao has a powerful weapon, like the Bandit Slingshot, you may want to do the entire floor to gain experience and items.
After completing B8, you will need to work in georama mode. Restore Cacao's house, and speak to him. He will tell you about Fudoh (Goro's father), sing you a song, and give you an Odd Tone Flute. You will need this to bring the Killer Snake out into the open. Then place the river parts so that the riverbed runs from the waterfall to the entrance to Treant's domain. Once it is complete, two little gnomes will run out and open the dam, allowing water to flow through the village. You can now go speak to Treant, but you will not be able to understand him unless you equip the Hunter's Earring. Once you have done so, speak to Treant. He will bestow on you, by way of a giant sneeze, the Serpent Sword. This weapon cannot break until it has served its purpose, which is to defeat the Killer Snake. Equip the Serpent Sword, and enter B9 of the Wise Owl Forest.
Territory 9: When you enter the floor, you will have to duel two werewolves. After defeating them, approach the cave opening. Press the □ (Square) key, and use the Odd Tone Flute to attract the Killer Snake. When he emerges, you must fight another duel. If you fail to defeat him, you will have to repeat the battle until you win. After he falls, you will get the Bone Pendant, and the Serpent Sword, having fulfilled its purpose, and is now a breakable, evolvable weapon like any other.
Take the Bone Pendant to Goro. Inside it is a message from his father, Fudoh. Goro learns the truth about his father's disappearance, and must accept that he has been wrong about the villagers. He is now free of his bitterness, and ready to rejoin society. He joins your party with renewed hope.
Back at B9, use Goro to open the floor-based switch which blocks your path. There will be many more switches of this type throughout the game, and Goro is the only one who can open them. Proceed to B10, and continue with your dungeon exploration and atla-gathering.
Hope that helps!