Head to Lorimar Castle and enter the first door on the right. Next, head up and speak to the elderly gentleman named Rooney. Speak with him four times, and he will go on and on about how he used to have friends. He will then ask if you have good friends. Tell him yes, and then speak to him again. He will ask for Lil Cactus. Tell him yes again and he will ask if you are sure. Say yes again and Lil Cactus will appear.