Building on the answer from Deusovi:
Your hand wasYou were given the power to
Create anagrams of the creatures you encountered
Goat -> Toga
Ewe -> Wee (Deusovi)
Ram -> Arm (Deusovi)
Lamb -> Blam (Deusovi)
Horse -> Shore (Deusovi)
Seal -> Ales
Otter -> Torte
The title of the Puzzle is "The Puzzle that Dims a Tornado"
Tornado is a cryptic hint pointing towards an anagram.
Taking an Anagram of "Dims a" gives you Midas who was a King from greek mythology who turned everything he touched to gold. This is the story that you were told by the old man and you appear to have gained a similar power, but you turn everything to anagrams.
This suggests that the man you met was in fact Dionysus and, as Deusovi has pointed out, his magic word is an anagram of "Untouch".