Seashore level:

In order to complete the seashore level, look up.
There is a room that spyro must enter to defeat the
shark sub.  The secret cave is in the area that 
sheila is in.


Defeating the sharksub:

Forget about shooting the torpedoes at him straight
away. Instead, keep collecting the torpedoes until 
you have about 30. This way he does not have a chance
to keep fixing his sub.