After a few hours voyage, Sub-C is still cruising on the ocean...

Go East

Go east and there will be a cutscene. Say Yes when asked if you promise to find the mother dolphin's son.

Afterward, continue going east until you find an island. Go through the cave opening in the wall of the island and go into the dock in the beach. Keep going north and you will automatically walk out of Sub-C onto the beach.

Visit the Lighthouse

You can optionally go west and enter the lighthouse. Talk to the lighthouse keeper and he says to visit his wife in the house to the south. (His wife will still talk to you even if you don't talk to the lighthouse keeper himself.)

Visit the Lighthouse Keeper's Wife

Go to the southeast corner of the area with the dock. As you approach the southeast corner, you might notice some bubbles in the water. This indicates a hidden tunnel in a wall next to the bubbles. Go onto the bubbles and you will be just north of a palm tree. Go east and you will go through a hidden tunnel in the wall. Then go to the southeast corner and you can go east through a hidden opening like before. Get out at the dock and go into the house to the south. Talk to the woman in the house.

Find the Bottle

Afterward, go back outside, and you will see a bottle on the beach to the north. Go onto the southern beach, and go all the way east and north, to the north end of the southern beach. Then go west and you will enter a hidden tunnel. Go north, then when you reach the top, go east. Then go south and get the bottle. You will get an ID code. You can optionally read it again (but you don't need to memorize the code).

Go Back to Sub-C

Go to the north end of the beach, then go west into the hidden tunnel. Go to the south end of the tunnel, then go east to go outside. Then walk back to Sub-C and go into it. There will be a cutscene.

Afterward, you can press B while in Sub-C to dive underwater. Move Sub-C onto the nearby water that has dark waves on it, then press B and you will automatically go north to the next patch of dark water. Go northwest to the next dark water and press B, then go north through the tunnel and get out at the dock.

Get a Big Heart

Before you go into the cave to the northeast, you can optionally go south until you are to the left of the Big Heart. Go east and you will enter a hidden tunnel. Keep going east to get the Big Heart. This will increase your maximum health by one, and it will fill all of your hearts.

Go into the Cave

Then you can go west to go back through the tunnel, then go northeast to the cave. Go inside to enter the chapter 2 dungeon.