Dream Castle, issued in 1983 and making its appearance in all MLP movies, was originally the home of the ponies until it got destroyed in My Little Pony : The Movie, after which the ponies had to move to the Paradise Estate. The castle can be folded in and out and contains multiple accessories, such as a pulley with a basket in which Spike the dragon can be pulled up or down. There's a similar mechanism to pull up the castle bridge.
In my set there are some missing pieces, such as the yellow and purple felt banners, which to my opinion could easily be copied. Same thing for the pink blanket to put on the throne. Apart from this, my playset seems to be complete (though the original one only has one basket for Spike and two yellow round hoops). Pony Majesty was having her spa treatment at the time this picture was taken, and comes with her original purple cape.