By using KTs you can get over the wall to the left of the Dragon Palace to enter the Water Dragon without having to talk to Otohime first. You can either go fully over the wall, or go over the first wall, then drop down and enter the Water Dragon loading zone out of bounds.
NG+ 2017 method
Since you can only use slope KTs in NG+ 2017 you have to jump towards the actual building and use it to go up. After the initial jump towards the building, use 3 single jump slope KTs to get height. Then do a ground dash slope KT to arc around the invisible walls and land inside the room.