In the small cemetery on the docks end of the Knothole Island village near The Chieftain's office is a mausoleum with a dog statue on top. In order to get your dog back you have to have a villager follow you to the mausoleum. Once you arrive at the door with villager in tow the door will open and the villager will eventually wander in. The villagers tend to circle around the door a few times before actually going in the tomb. By walking closer to them (and the crypt) while they are passing the door, you may be able to get them to go in more quickly. Once they're inside you can activate a nearby lever which seems to electrocute the villager. When the door opens again your faithful canine companion will be sitting inside and when you approach you will see a reunion scene similar to the one in Oakfield earlier in the game. From then on it's as if your pal never died.