As you arrive, keep going foreward through town (A.K.A. Go 3 areas north) untill you're in the Palace Gates. There you'll find Aladdin. As you're about to leave him he'll call you back for help. He wants you to find Jasmine. To find her, go one area south and one area west. You'll find out she's captive by Jafar. FIGHT! This battle is so easy you can just count him as an enemy. After that, take her to the area you arrived at, so she can see Aladdin. But Jafar will freeze everything and Iago will nab Aladdin's lamp. Oh, wait... D'oh! That's inapropriate!
Forget I said that. You have to find and talk to Iago 3 times, but I can't help you now, because Iago goes Randomly through the areas. Once you do that, the Genie will come out and take you to Jafar. Once arriving, Jafar will close the mouth of the cave, and you'll have to go through the System Sector east of the cave. After that, go inside the cave. Head foreward all the way slayin' Heartless and avoiding traps untill you get to a waterfall made of sand. You could simply run through it, but that would be too booring. Run back untill you find the System Sector, halfway across the room. After that the waterfall will diseapear, leading into the next room.