YES! I did it. The Pegasus Boots have been the bane of my existence with this game. The chipping problem and the issue with the trees that Ghostknight pointed out and Neobullseye is now fixed. The tree thing was because those trees were created on Layer 1. For some reason, the game didn't register layer 1 as solid even if they were. I scoured over the script for the Pegasus Boots forever. It uses a simple method called isSolid() to ask the question "is this object solid?" Based on the description provided, it works on layers 0, 1 and 2.
As I said, this wasn't the case. Apparently, you have to use Screen->isSolid()... (who would ever guess that?) and it fixes the issue. On the update I'm working on I dashed through all kinds of layer 1 and it worked great! Not sure how much you guys followed all of that or needed to know, but I am excited, so yay! 
@zcfan:
You're just trying to get to that locked door in your earlier picture right? There are two keys in that side to get. This is the Mountain Entrance.
1 - Go up two screens, kill all foes, and dive at the now accessible stairs.
2 - Go up two screens, and go through the hallway to the right and you'll eventually get to another key.
The walkthrough wall is to access the door. To get to it, from mountain entrance, go up 2 screens, right 1. Then just walk through the south wall. The chasers there if are placed in such a way to try and hit you but miss and you might notice the wall is fake.