They enter the blacksmiths house ans sure enough there is Watts.
"Hello. I am glad you are here. While I was walking in teh forrest I ran into this lady who told me that Santa Clause and Rudolph have been captured."
"That's right. My name is Gizelle. I was with my friend, Vern, investigating the desertion of the once tropical town in the ice country when he went insane. He destroyed the whole town and mutter somethin about how teh REpublic must be defeated. Then, he teleported Santa Rudolph and himself to the sand ship."
"What are we waiting for? Let's go

...to Kakarra desert!"

...into the forrest!"