Once the party enters the tunnel, both Seiren and Jackal will complain that it stinks.
Head straight then left. Keep moving forward to grab the chest, you will notice a Coconut crab in the left passage. Attack it, but note that it will heal itself (very quickly) as long as it's in the water, but isn't resistant to Jackal's ice magic. It's attacks can also paralyze you so be careful. Use Gathering to lure it to dry land in order to kill it.
Head further down the dry passage to fight another Coconut crab, half way during the fight another one will join in. Same rules apply here.
There are two holes in the wall in this passage. The one on the right leads to a Save Point, a Summon Circle (For Lotta) and two chests, containing Silver Arrows and Gnome's Gold Ore.
Odd, why would there be Silver Arrows here of all places? Move on to the Left hole to continue on and climb down the ladder.
Manamia will comment that the party is getting closer to the outside as the sound of wind has changed here.
Head straight, then turn left. There is a save point to the right, then climb up the stairs to go outside. More Coconut crabs will attack the party. Lure them to dry land in order to kill them. If the crabs won't leave the water, push them up the stairs by attacking them.
Once all the crabs are dead, search the area for treasure chests (there are four of them), then head through the door on the right. Go down the stairs and to the right, then right again for two more chests. Going to the left will lead back to where you started, as the pathway is a square. Going straight will lead back to where the party came from (or so Seiren thinks). Elza pays it no mind. Make another lap around to the outside again, leading a scene where the party says that they are indeed walking in circles. Suddenly when they make it outside, Nebirous appears.
If you fought him in the Haunted Mansion, the same methods to defeating him apply, except this time he summons reinforcements if he runs away inside the sewer. The Silver arrows you found earlier will make this fight a breeze, so shoot away while the party beats on him.
Nebirous drops a Dragon Claw after you kill him. Afterward another gate opens (and a short scene), so head there (because the arrows says so).
In the next area, go straight and the water starts to get deeper. Start swimming to the left and head for the area with the save point. There will be a bridge and another scene. Elza will go scout it out as the others hide. Look up in Seek Mode as a giant spider tries to eat Elza's face.
Boss: Monstrous Spider
Like other spiders, this thing will always auto-guard from the front, so attack it from the rear. The Knight sword will make this fight more bearable as it is strong against spiders. Or if you have a Grand Swell sword, that will automatically Guard Break the spider's defense. Have Yuris cast fire spells on the spider, then use Wind to Guard Break it.
The spider as it moves around will destroy the area, so beware of falling debris. The spider can also cause Silence and Paralyzed status effects.
Half-way through the fight, the party will be interrupted by Gurg forces who will join in on the fun, so take out both the spider and the Gurg troops.
The Spider will also attack the Gurg, so Seiren and Jackal suggest to Elza that they should sneak out while the Spider is occupied with the Gurg. You are free to either kill everything, or if things look dicey, run away.
If you do kill the Spider, this gets rid of the Gurg as well and earns the party a General Sword+2.
There is a save point as well as a Summon Circle to call Lotta here.
Head into the battering ram thing the Gurg troops used to break into the area to go to Chapter 37.