Going Home - S3-E11
Other mistake: In the October 2011 flashback, when Mary Margaret gives Henry the storybook for the first time, he opens it to show Pinocchio and Geppetto in an illustration. However, according to 1-20 "The Stranger", Pinocchio's story was not added to the storybook until later after August came to Storybrooke, several months later. This is confirmed in 4-13 "Unforgiven", where Regina and Henry look at the exact same picture, and notice that the paper is different than the rest of the book, because this particular story was added by August. (00:17:00)
Answer: He knows who she is because he knows that the fairy tales are true. He was also shown to sneak out to go see Emma or someone else. Sometimes he succeeded, sometimes he didn't. This is how he knew to look for her despite his strict mother.