It's up high in the forest - the guard tells you that he lost it when he threw it at some birds... in fairness I never actually created the bird enemy that was going to exist solely in the forest area, so you're forgiven for not finding it :D
It's also worth mentioning that you need both the Earth and Water stone skills to reach it!
I tried to make the platforming a little difficult in areas that would allow for additional hearts or stamina, but not too taxing for the "main route" so that it wouldn't be too frustrating. I might have to tweak a couple of areas though as I agree that bumping your head is annoying!