To open the labyrinth, Shantae must first meet the genie at the pub in Bandit Town. Said genie will agree to meet her at Twinkle Palace and open the door for her, which she does by bumping her hips against it.
The palace is full of bouncing boulder traps, sharp icicle spikes, rotating cube puzzles, and whirling vortexes that send Shantae spinning in whatever direction you press. It is probably the only ice level in the history of videogames that does not have those obnoxious slippery ice platforms. This is fair enough, because once you get the
The Dragon Rider is short creature who rides a big blue dragon. Here's how you beat him:
Transform into the Harpy and fly above him, stomping on his head. Yes, you heard me. For some reason, in this one battle, Mario physics prevail, and will send the dragon plummeting to the ground, where he will be vulnerable to easy attack.
Attack the midget and his mount until they get back up and start flying around again.
Eventually the dragon will croak and his rider will be left without a thing to ride on. At this point he'll surrender and apologize for his behavior and - no just kidding, he'll run around till you whoop him! Send him packing and that magic watchamajig will, briefly, be yours.
In the first room you find with the fiery vortexes that spin Shantae around and spit her out in whatever direction you press, there is a set of hidden tunnels crossing through the leftmost wall. Both are clearly suggested by an inset in the wall. Following the horizontal one will lead you to a little space with a Baby Warp Squid.
From the 'floor' of the first fiery vortex room, Monkey climb the eastern wall and jump onto the strange-shaped platform of ice. Transform into Shantae and do a leap of faith to the left. When you hit the vortex, press and you will arrive on another platform, this one with a Baby Warp Squid.
There is a room later in the labyrinth with two entrances, each with a suspicious crawlspace below, and a large 'crown' shape in the middle of the room which holds three puddles of jumping fish. Crawl into said crawlspaces and navigate hidden passages until you reach the baby warp squid and a fiery vortex.