About that axe. You don't have to pick it up, because of... another small bug (fortunately this time it's not dead end). In other words, just walk inside the Goblin cavern (next screen) and the axe will magically appear in your inventory (in main character's hand). Now I understand why I couldn't find a single tester in the game's credits.
BTW, I've finished the whole game about an hour ago. So it actually is possible.
