Hoping to make your life's design a bit more dynamic!

What level were you?
And did you have all other magic levels?

If you found the circle of torches, the actual location appears to be random. Walk all over the place in a pattern and search every square. You should stumble onto it eventually.

I was at level 80 with Lina cuz you get 900 mp in that level so each dragon slave or spell is 99mp.

I know it's a late reply, but to "unlock" the spell, you first need to do that "obtain the password" side quest in Figaro city. After obtaining the password you then talk to that old man in the hospital & he will tell you of the "legendary spell" Dragon Slave, congratulations you've just unlocked the spell! Now fulfill the "must have learned level 10 magic" requirement & get to the area on the photo & viola! You now have the spell.

You seem to have confirmed that a player doesn't need to be at a super high level such as 80, also.

In my playthough I had to lol but I got it

Ah, this is much more sensible, thanks for your finds CRV10. Getting to Lv 80 is borderline impossible on any other place besides the last two dungeons and by then
knowing Dragon Slave is not all that useful, as lower tier spells can do a great ammount of damage and get you through (not to mention DS does zit against Shabrangido).

@Wildbill & Red Soul: I have your first installment of the patch to thank as well

During my first play through I really went nuts & talked to every NPC to look for typos & such that's why I was able to accomplish that "obtain the password" requirement for learning Dragon Slave

So ultimately, the credits go to you guys I was just a Slayers Anime fan who wanted to play this game in English who happens to have stumbled upon that bit of information as I was playing.

Oh & I do know from my posts some time ago that you guys despise the use of codes, but here are the ones I used during my initial play through:

Credits go to Chrome Dragon who posted this on Cheatzilla:

7E192C:7F
7E192D:96
7E192E:98
Max EXP Conny
Submitted by Chrome Dragon

7E18DC:7F
7E18DD:96
7E18DE:98
Max EXP Lina
Submitted by Chrome Dragon

7E1ABE:00
No random battles
Submitted by Chrome Dragon

7E18B0:9F
7E18B1:86
7E18B2:01
Unlimited money
Submitted by Chrome Dragon

Well actually he kinda got it wrong, the codes he listed are for "Lina" & "Connie" are actually for the first & second character slots in battle. I figured this out as I was looking for the codes for Naga & Claire as I thought that was what I was supposed to be looking for. I did find the codes but when it was time for me to look for codes for Lemmy I did not find them. Then I found these codes on GSCentral:

Slayers Miscellaneous Codes No Status Change P4 7E3CE500 sprinter_h (UD)
Slayers Miscellaneous Codes Infinite HP P4 7E3CC327 sprinter_h (UD)
Slayers Miscellaneous Codes No Status Change P3 7E3CA500 sprinter_h (UD)
Slayers Miscellaneous Codes Infinite HP P3 7E3C820F
7E3C8327 sprinter_h (UD)
Slayers Miscellaneous Codes No Status Change P2 7E3C6500 sprinter_h (UD)
Slayers Miscellaneous Codes Infinite HP P2 7E3C420F
7E3C4327 sprinter_h (UD)
Slayers Miscellaneous Codes No Status Change P1 7E3C2500 sprinter_h (UD)
Slayers Miscellaneous Codes Infinite HP P1 7E3C020F
7E3C0327 sprinter_h (UD)

Which again are somewhat incomplete as the last line of code for the "Infinite HP" Code for P4 was missing which by the way is "7E3CC20F".

Comparing the codes I got from Cheatzilla with these ones from GSCentral I was able to locate the two codes for the "max exp. points" for the third & fourth character slots which are:

max exp. 3rd slot:

7E197C7F
7E197D96
7E197E98

max exp. 4th slot:

7E19CC7F
7E19CD96
7E19CE98

In my current play through I'm not using them anymore though as this time around I want to enjoy the game fully

I guess despise is too strong of a word really, but when dealing with patches codes sometimes may produce
odd behaviors that wouldn't happen otherwise (and in turn can make the job of ironing out bugs harder).
That said, from a gamer's point of view its always best to play a game without any sort of cheat code to get the most out of it.

I just got to Figaro City & had redone the means to unlock Dragon Slave & I just had to post what I did...

OK, here it is, the complete step by step means of unlocking Dragon Slave:

1. Make sure you've already learned all Levels of Magic (Levels 1~10) by learning of them in the Magic Guilds & that one level from Liddick (level 4 or 5 I think).

2. Once in Figaro go first to the Hospital & talk to the old man in the upper right part of the hospital. You'll know it's him if he ends his dialog with "unless you're here to give me a password". This is the most important thing.

3. Now go to the Magic Guild & learn Level 10 magic (you could learn level 10 magic first before talking to the old man if you want as well) from the "wizard with personal issues" (the guy in the far left room at the Magic Guild's 3rd floor) as the Chancellor (the guy in the middle room) is rather busy.

4. Now head on down to the Magic Guild's basement library & go to the far right, talk to the guy walking around on the second row of shelves (while at it, learn Valmaceid in one of the books on the shelves as well). Talking to him will yield the "password" you'll need to give or rather, say to the old man in the hospital. The password by the way is, "Isn't that old man a pip?", too bad having read about it here on my post won't do you any good as you don't manually input it in game

5. Now go back to the old man in the hospital and chat with him again, this time around Lina will say the password & the old coot will have added new lines to his dialog. He'll reveal the location of "Dragon Slave", where to find it (Flagoon Tree of course) & who "created the spell" which is Ley Magnus of course

Congratulations! Now just play through the game until you can explore Flagoon Tree & go to the altar where Dragon Slave is at & you're done!