As soon as I finished level 3 and ended up just outside the palace, I backtracked to get some upgrades. As soon as I returned, I was sent right back to the beginning of level 3. I think this happened because I didn't enter/approach the palace after landing on the beach, or something like that. Last time, I entered the palace before going back for upgrades and this didn't happen.

Oh well, I'll just end up with a lot of rupees again, probably.

Even the level 2 defense ring is quite strong. Next time, I'll probably stick with level 1 for a challenge like last time.