As you enter, you see Gerad tending to one of the near-unconscious locals before heading to his crew. Follow him north and out of the prison cells, then down the western stairwell here. Repeat in the next area, which should take you to a brand-new area.
Here, go north and downstairs. In the next area, go south into the next room. There, go south and open the chests to obtain a Crystal Helm and a Gravity Rod . Go into the room on the west side and open the chests for a Hi-Potion and an X-Potion .
Go north out of this small room, then through the westernmost door. Here, go north and through the door to find a Royal Crown . Go back downstairs to B3F, then through the north-central door. Go north to the engine room, which seems to be teeming with … stuff. Tentacles, I guess.
This is probably why the castle can’t move – the engine is jammed, though I guess that might be hurting whatever’s beneath it, too. (Wonder if Ultros grew in the past year?)
Heal up before speaking with Gerad. Once you do, he’ll finally reveal himself as Edgar (I knew it!) before attacking the tentacles.
Tentacles x 4
Each Tentacle has the same moveset. They can use a basic attack, Stun (which can inflict Slow), Bio, Poison, Entwine (basically a party-wide Stun), and Grab . Grab will temporarily drain some of the character’s HP for a while and they cannot attack until the character is Released.
It’s a good idea to start this battle by using Kirin, Fenrir, and Siren. Kirin is for the Regen, Fenrir for dodging attacks for a bit, and Siren is to stop most of the magic spells.
Afterwards, set Edgar on using his Bioblaster for the rest of the fight, except once you’re down to one Tentacle, at which point you’ll want to use the Drill. The other two need to try and focus on one Tentacle at a time. Let Celes use a "-ra" on the chosen Tentacle, opting to multi-target if it is possible (all other Tentacles have max HP or won’t absorb). Sabin can do what you want; use a strategy like Celes’s or go to using Blitzes. If needed, have Celes use Cura.
After the battle, dry off the slime and you’ll watch the Crimson Robbers leave the treasure chamber with full arms, believing that the monster ate Gerad. (I think the engine room is too clogged for him to be drawn through, but whatever)
Go north into the nearly-emptied treasure chamber and examine the suit of armor to find the Soul Sabre. Then backtrack through the castle rooms to meet the old man who usually handles the underground travel. Apparently, the engine’s been fixed and we’ll return to the surface shortly.