World 2 has two major areas- the overworld, and the underwater world. The overworld has several islands, two towns, and a whirlpool connecting it to the underwater world. Undersea tunnels connect World 2's islands. The underwater world has one town and the Undersea Palace.
The dragon king Ryu-O once ruled here, but he was deposed by his brother Sei-Ryu. At the time the party arrives here, Sei-Ryu occupies the Undersea Palace, and pirates make it dangerous for persons in the overworld to sail between the islands.
The party kills Sei-Ryu.