After speaking to the little girl's brother go back to the tunnel and you can now continue past the door to the playroom. You get to a large cavern with a 'river' of green slime.

You need to familiarize yourself with the surroundings. When standing in front of the slime, you can see some blue crystals (the second lot in the graphic) and a cave across the slime. There are also some blue crystals to your left, which you can get to from this side of the slime. The slime is flowing into the 'river' from an area to your right.
First go to the blue crystals on the near side of the slime. Insert the Magic Pyramid into the small crevice in front of the crystals, then remove the loose Crystal. Remove the Magic Pyramid as you need it again.
Now go to the area on the right of slime, where it's flowing from. Look around carefully to find a hotspot on one of the stone ledges. Place the Magic Pyramid on this ledge to stop the slime flowing. Watch the cut scene carefully and note that the level of the slime 'river' drops and the slime also covers a rock plate in front of the second lot of blue crystals.
With the slime level lowered, there's a bridge you can cross. Inside the cave you find yet another crystal between two mushroom-like plants. Click the loose Crystal on this crystal and the dead plant in front will be brought back to life. Take the Magical Branch from the plant.
Remember the rock plate in front of the second lot of blue crystals you saw in the cut scene? You can get to the ledge on which you put the Magic Pyramid from this side of the slime as well. From here the ledge is to the left of the bridge. Remove the Magic Pyramid to restore the flow of slime, making the rock plate accessible. Place the Magical Branch in the rock plate, put the Magic Pyramid back on the ledge and then watch as the Magical Dust drops down into the slime. Again remove the Magic Pyramid and you're able to take the Magical Dust from the rock plate.
Finally, put the Magic Pyramid on the ledge again, allowing you to cross over the bridge and return to the area overlooking the sea. Note that you won't be able to take the Magic Pyramid after doing all this.