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I found a mini medal when I was looking around at the bottom of a well. The game told me they don't appear in my regular inventory, but it didn't tell me what they are for.

What are mini medals for? Are they just a collectible?

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The Wiki says that:

...mini medals are collected by a king who lives in Minikin's Dominion. In the NES version, a total of 32 medals could be found, which were used as a separate currency for the prizes offered by the medal king. A player could get more than one of the same prize offered by the medal king; however, in order to get the best prize the player could not buy any other prize, as it cost 32 medals.

It appears you can bring the medals to a king in Minikin's Dominion for prizes.

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