Carrying too many items to hold Magic Powder

Looks like this is a known glitch. Getting two shovels will require you to use up all your magic powder, bombs, or arrows in order to have room for the other items. If you use up all you magic powder, the game is rendered unbeatable.

From the above link:

The magic powder is not vital until towards the end of the game, so it is easy to miss the error (which results in the game becoming unbeatable).

If memory serves, the blob form of the final boss can be beaten with just the sword (it takes a long time; about 10-30 hits, if I remember correctly. I was young.)

What system are you playing on? If it's on anything but the 3DS, I can craft a code to replace the shovel with something useful.