Here's my video walkthrough of Act 3, complete with this achievement:
1. You'll use Xanadu once. Then you go back to Donald to fix it.
2. Upon using it the second time, play through the story.
I went to the forest, and kept picking directions until I found "the hole".
3. When you walk up to the hole, you'll get options. Choose "Lean in a bit and check it out?"
4. You'll fall in, die, and unlock the achievement.