After clearing the Lanayru Mining Facility, defeating Moldarach, and heading back to Skyloft, stop in the Bazaar and speak with Dovos who will mention a rumor about a woman crying at night in the dorms. Next head over to the Knight Acadamy and speak with Henya, the old cook and she will mention an annoying voice coming from the restoom. Walk toward the restroom on the first floor and Link will here a voice coming from inside pleading for paper.
Look to the right and speak with Cawlin to receive a love letter to Karane. You now have the option to give the love letter to either the ghost in the restroom or to Karane. Either choice will still net 5 Gratitude Crystals and neither option has any real affect on the story.
Give love letter to ghost
To give the love letter to the ghost in the bathroom, find a bed and sleep until night, then head over to the restroom. After an interesting cutscene, head back to a bed and sleep until morning. Head back to Cawlin and inform him who you gave the letter to, and go bad to bed and sleep until night one more time. Head over to Groose’s room to find Cawlin asleep in the bed with a strange visitor. Speak with the visitor to receive 5 Gratitude Crystals.
Give love letter to Karane
Karane can be found in the classroom on the first floor of the Knight Acadamy. After giving her the love letter from Cawlin, she will confess her feelings for Pipit. Head upstairs and inform Pipit of the events that have transpired and then head back down to Karane for a comical debacle of love confessed, love gained, and love lost.
Afterwards, speak with Pipit again to receive 5 Gratitude Crystals.