As you run through the Stone Hive valley, you will come to a big circle. You cant miss it because you are forced to run over it. When you reach the circle, there will be a path that leads into the Hive Castle. Take that path to the castle, but do not enter into the castle. If you run along the castle to the right, eventually, you will come to a large body of water. This is where the mushrooms are. When you reach the body of water, run to right along the water's edge and you will come to a small forest of tall mushroom plants (not npc). At this location is where the Manic Mushroom spawns. I had to kill several garden mushrooms here in order to get him to spawn. It only took about 30 minutes before he spawned for me after killing about 6 garden mushrooms. The Royal Ruby dropped immediately.