Conditions to trigger instance: Finish the game, obtained pickaxe, and used it to open the path to the Otts Fall/Lake Hidden Map Area. Walk behind the waterfall for a 2nd hidden area and walk up past the fishing site.
Siela: What is this...? An underground lake?
Siela:!? Dra... gon...? Too nice for a dragon. What is it?
Siela: Wow, what a calm dragon. Come over here.
Siela: Oh no... Ok, NOT calm AT ALL.
Siela: It's still alive! Oh, it's escaping. It disappeared!!! Oh well, I won. Right?