Did you do the candle in the wind quest? When you rescued the guy stuck on a pillar over by the trainer Kenneth, he gave you a book. Read it at the windy spot with the tombstone, then light all three candles.
You need to get into the tower and clear it (kill Laiken) in order to be able to turn into a dragon. Finish up everything you have left to do before the final part of the battle tower (you will be given a warning when you reach a certain point). You can rescue the people in the quarry tower in Broken Valley and retrieve the book on the ship in the tree in sentinel island after getting the tower (though you may want to consider reading the book yourself, rather than completing the quest), but any other open quests will fail, and many locations will be unavailable.
