Near the castle courtyard, the goblins find a forge with the blacksmith who wants to help them.
Get Things from the Courtyard
Be sure to get the imprint, sword, and mayonnaise from the castle courtyard first.
Get the Stool
Get the stool from the bottom-left of the screen.
Get the Meat
Have 
Fingus stand on the stairs below and to the left of
Focus, who is in the
upper-right of the screen.
Have 
Winkle use the mayonnaise on Focus, then switch to
Fingus and have him use the stool on the meat.
Get the Key
Give the imprint and the sword to the blacksmith.
Then have Fingus stand to the right of Otto, who is standing
in the upper-middle part of the screen.
Have Winkle use the stool on Otto, then switch to
Fingus and have him click the lance that Otto swung.
Fingus will go to the upper-left part of the room.
Have him click on the bellows to fall on them.
Talk to the blacksmith to get the key.
Take the Anvil
Now have Winkle take the anvil from in front of the
blacksmith.
Get the Diving Suits
Go back to the castle courtyard and have Fingus
use the key on the cupboard with the fish on it.
Then have Fingus check on the cupboard to get
Diving Suit 1.
Then have Winkle check on the cupboard to get
Diving Suit 2.
Get the False Teeth
Use the meat on Amidal, who is in the bottom-middle of the screen near the bones. You will get false teeth.
Go to the Well
That's all you can do here right now, so move the cursor to the upper-right of the screen until it turns into a door icon, and click to go to the well, or move the mouse to the top of the screen and choose the wooden sign, then click Well to go to the well.