Thanks Darunia that block room was the one I couldn't figure out. Mister Snooze, level 3 is at the far northeastern part of the map where the mountains are. There is a cave that has some enemies that require a boomerang in order to kill them. Once you kill them the staircase takes you to the entrance of level 4. We don't need any key to enter the level.
Thank you, of course, now I remember that odd cave. hehe
I have been looking all over the map, geez