Find: Summon Kjata Materia, Water Ring, 1 Magic Source, Aurora Armlet, Comet Materia, 1 Guard Source, 1 Elixir, & Enemy Skill Materia.

Equip Tifa and hop in the Tiny Bronco, which is parked on the beach. Take it east along the coast, then hook around north then west, along the river by the Gold Saucer. Go to the very edge of the continent, and go north again. Once you get around the northwest tip of the continent, go east to the Northern Continent and get out on the beach. Here is Bone Village, which is where you will find the Sleeping Forest.

Talk to the man standing near the top of the screen. He asks you if you want his crew to dig for the Lunar Harp for you. Pick the first option and pick the first option again. The diggers work in the following fashion:
You place staff members by pressing the button. For 100 gil, you can place one crewmember. After you have placed the desired amount (up to 5), press the button again to detonate the bomb. They will all face the treasure. Simply select the spot that they all turn towards and dig here.

The spot to dig in is on the top level. Climb the ladder and go to the tent stake just above and to the left of the burnt-out fire. The Lunar Harp is here. Note: You cannot get the Key to Sector 5 yet. Now talk to everyone else in town and enter the forest. If you have the Lunar Harp, you will get a message that the Sleeping Forest awoke. Otherwise, if you try to continue on, you will return to the same screen.

You can now get the Summon Kjata Materia if you haven’t already. On the same screen that gave the last message, stand still for a while. You will see a red object flickering in the trees either to the right or left. Every few seconds it appears on one of the sides. Grab it; this is the Summon Kjata Materia.

Continue north into the forest. When you come to the pink bush, take the path to the right and under the log to get a Water Ring. Now take the left path up and through the log. BTW, you can learn the Enemy Skill Death Sentence here from the Boundfats (little spiked yellow guys), if you didn't in Cosmo Canyon. It is easier if you manipulate them. Also, you can learn L4 Suicide from the Trickplays, if you have not already learned it. Head north to the next screen. Follow the path back to the World Map.

Go north into the big tree and you will find that you are now in the Forgotten City. Head up and take the left path to find a save point and a Magic Source in the building. Exit the building and enter the cave on the far right. Take the stairs down to the lower level and get the Aurora Armlet.

Return to the first screen where there are the three paths and this time go up into the tree. Enter the giant shell and go to the top for the Comet Materia, which can unleash one of the more powerful attacks in the game. Go back to the main screen and this time choose the path on the right.

Take the first path to the right and enter the house. Climb up to get a Guard Source. Now go back to the path and go up. Enter the next house. Get the Elixir from the chest on the right, then climb the ladder to the beds. Choose not to sleep, so you can grab the Enemy Skill Materia hidden behind the top bed, exit the house, and enter again. This time you have to get some sleep before you are able to continue.

Cloud wakes up and feels something. Go back to the center shell house inside the tree (where you found the Comet Materia). Enter and take the blue stairs down.

Take the stairs down and to the right. Jump across the logs to Aeris. If you have a problem here, all you have to do is hit left to jump. Run up to Aeris, and try to talk to her. Cloud draws his sword. Try to talk to her again. You can use the D-pad and the X button to try to avoid it, but eventually you have to hit and try to kill Aeris, fortunately Tifa and Barret stop you.

Sephiroth makes you fight another mutation of Jenova.