Talk to Nada a few times and she will eventually find the door. Head towards the stream and explore. It is best to look at everything in the scene, even things that seem unimportant. Pick up everything that you can, and talk to your Companion if you're stuck. If you can take it, then it's gonna be important to the game.
Most people get stuck trying to figure out how to get beyond the bucket.
After you have Nada get the anchor and the rope from under the pier in Isthmus Village, head back to the stream and use the anchor to pry the log from the log jam. Bring the log to the Headman and have him make it into a long flat board. Pick up the rock on the ground in front of the Village entrance, and head east to find the boulder. Put the board on the boulder, and the rock on the board. Ask Nada to slap the board with her tail, and your catapult whacks the rock into the pail.