Including the Sleeping Forest and Corral Valley
Unfortunately, there is no easy way to travel directly to Bone Village. There is not enough shallow water in the ocean in the center of the map to allow you to pass on either side. You are left with traveling around the west side of the western continent, around the east side of the eastern continent, or traveling down the river past Gold Saucer and North Corel / Mount Corel which is likely the fastest. Use your mini-map (with the Select button) as well as the map below to help guide you to Bone Village.
The Village is located in the forest of the northern-most continent. Enter the village and speak to the man sitting down near the open treasure chest. You can buy items off of him including Diamond Bangles and Rune Armlets. Diamond Bangles are the strongest armor, however Rune Armlets provide double Materia growth rate. I would recommend purchasing at least one Rune Armlet to keep your Materia growing steadily. Just make sure to keep the character that you equip it to well protected; you can use HP Plus Materia to supplement, put that character in the back row or have your other characters use Cover Materia to protect them.
The foreman will also give you the option of attempting to excavate treasure in the area including the Lunar Harp which you will need to get through the Sleeping Forest. Note: for those unfamiliar with the Sleeping Forest, you can find it by traveling up to the top level of Bone Village and heading north-west into the forested area. You can try to proceed through the forest but it is essentially an endless loop. Cloud and the team must “awaken” the forest using the Lunar Harp in order to proceed through.
How the Bone Village dig works:
Start off by telling the man at the front of Bone Village that you would like to “Start diggin’”. He will then ask you what type of treasure you seek. You can select “Lunar Harp”, “Good treasure” or “Normal treasure”. Select the Lunar Harp for starters. You then have the option of placing ‘staff’ in and around the dig site around the village. You can place as many as you like for 100 gil each and then once you detonate the explosive charge they will all point in the direction of the Lunar Harp. You can then select your dig point using the staff member’s line of site to help you triangulate the location.
With all that said, the Lunar Harp is located in the same place for each play through. The location is just to the left of the rising smoke on the upper level of the village. Use the screenshot below to help you identify the correct spot. You will receive the Lunar Harp from the treasure chest the next morning.
You have the option of searching for “Good treasure” as well while you are here. You can dig up a Mop, a Buntline and a Megalixir during the digs at Bone Village. Proceed up the second level and out the back of the village into the forest.
Walk past the first screen and, now that you have the Lunar Harp, you will get a notification that the sleeping forest has awoken. In this screen, if you watch closely, you will see a piece of red Materia that appears and disappears, floating through the forest. Either be really quick or try to predict one of the next places it will reappear and add it to your inventory. The Materia is the Kjata Summon Materia. Proceed to the end of the forest once you have obtained it.
Take the pathway that leads to the right and under the log to find a treasure chest that contains a Water Ring. Equip the Water Ring on one of your characters in preparation for an upcoming boss fight. Go back to the start of Corral Valley and take the pathway that leads left, up the steps and through the hollowed-out log. Continue to follow the linear pathway along until you reach the World Map.
You will reappear on the World Map in the Icicle Area. The pathway is linear again and the only place that you can travel to is the Forgotten Capital which is directly ahead.