Exactly. The Pinocchio story goes a little something like this:
Gepetto builds a little wooden puppet named Pinocchio to stave off his loneliness.
The BF enchants the wooden boy, turning him into a wooden puppet who can move and walk.
Pinocchio investigates the world and eventually finds himself in a lot of trouble with a group of boys who are taken off to Pleasure Island–they are told that Pleasure Island is a wonderful place where they can do whatever they desire. If I remember correctly, one they are there, they are never allowed to leave.
Somehow Pinocchio makes it out (I can’t recall how) and as Pinocchio and Gepetto are fleeing, the incident with the whale occurs. We saw the whale scene in the episode The Stranger. After the flee the whale, the BF turns Pinocchio into a real boy. This is the only part of the Pinocchio story we’ve seen so far.
I’m suggesting that Pleasure Island and Neverland are the same. Based on what we know about NL in Once thus far, they sound remarkably alike. If Pinocchio went there, he may have met Bae and Bae may have told him about the dagger. Young boys tend to commiserate. As for Jefferson, we don’t know how he knows August or Bae, but I’d be willing to be that all three of them know each other and about the dagger.