Kneehigh has made a point of making theatre that responds to its environment. As the Cornish company arrives in Ireland for the first time, Rosita Boland talks to the creator of its new play.

It's a surprisingly mild March day in Truro. It's a lovely part of Cornwall, loud with seagulls, not far from Falmouth, the Eden Project and Padstow. Truro qualifies as a city, as it has a cathedral, but it's really a small, laid-back town, with narrow winding streets, where people stop to chat to each other and are greeted by name in shops. I ask four locals what the population is; none of them knows. Those kinds of facts don't seem to matter here.

About 15 miles away, at Gorran Haven, are three old barns that serve as a rehearsal base for Kneehigh, the Cornish theatre company. Its latest show, The Wooden Frock, was created here and in Leeds, at West Yorkshire Playhouse, and has been touring England since the beginning of February. Tonight it opens at Hall for Cornwall, in Truro. Home audiences are particularly important for any touring theatre company. There is excitement in the town, with posters in every shop and most of the five shows already sold out.

Kneehigh was founded in 1980, at a time when Cornwall had no theatres. The evolving company used the landscape to perform in, improvising by playing cliff tops and beaches as well as village halls. As it developed, and even as more conventional spaces became available, site-specific work became, and remains, a key element in its programme.

"You have to be strong and elemental when you're performing on a beach, so the style of company has evolved to be physical and bold," explains Emma Rice, who is both Kneehigh's associate director and the creator of The Wooden Frock. It's a couple of hours before the show, and we're sitting in the cafe bar next door to the theatre. "We do three to four shows a year, and at least one of those is site specific."

The company has eight core members, with up to 20 others - actors, musicians, prop-makers and writers - involved from show to show.

Its interpretations of folk tales, legends and other classic stories have made Kneehigh's name as a company. Its production of Hans Christian Andersen's The Red Shoes, also devised by Rice, won her a prestigious best-director award in 2002, in the Barclays Theatre Awards, and toured to China, Scandinavia and the Middle East. Kneehigh was invited to bring The Red Shoes to Galway Arts Festival, but the dates didn't suit: its appearance this week at the Helix, in Dublin, will be its first visit to the Republic.

Another recent show, Roger Salmon, Cornish Detective, was set in a disused tin mine. "We didn't want to do an obvious, political piece about the death of mining," says Rice. "We wanted to use the mine in a metaphorical way." Kneehigh's show turned the mine into an old people's home. They took the audience into the mine one way and out another, from where there was a cliff-side view of the sea and an audience-participation tea party.

Rice has been with the company for eight years. "I'm obsessed by folk stories," she admits. The Wooden Frock is an interpretation of a Cinderella-like story but with very dark elements; the show is unsuitable for children under 12.

The roughest outline is the disintegration of a family: mother, father and adored daughter, Mary. The young, beautiful mother makes her older husband promise that if she should die he will marry only the person whom her wedding ring fits. What nonsense, he cries. Then she does die, suddenly and mysteriously.

Scores of women come to the castle over several months to try on the ring, but it fits none of them.

Her lonely daughter, trying on her mother's clothes to feel closer to her, also one day finds and tries on the ring. It fits. She cannot remove it. And then her father, discovering her wearing it, declares joyfully that he must marry her.

"How do human beings deal with damage?" asks Rice. "How do you find a way through it? Folk stories are everyone's stories.

"And there is nothing better than the audience coming out and telling you that what they saw described things in their own lives."

Rice is described as the director of the show, but as there was no script to begin with she has essentially devised and steered it over a year. She also co-wrote the script and co-designed the costumes, which are such a crucial part of the show that they are almost characters in themselves. "We always start with a story. Then it develops through improvisation with actors, but yes, I guess most of it is my idea. I see the whole show, the structure of it, in a very certain way. And I always know how it is going to end."

Hall for Cornwall, which seats 1,000 people, is almost full, with the audience sitting on either side of the stage. The rectangular stage is lit to look like a swimming pool, shadows shimmering on its blue surface like refracted water. When the actors appear, stepping from the low ledge that runs around the perimeter of the stage, the illusion is of them walking on water: everything confounds expectations and reminds us that nothing can be taken for granted. It is a wonderfully promising beginning that delivers over and over again in the two hours of performance that follows.

The five actors - Amanda Lawrence, Mike Shepherd, Bec Applebee, Alex Murdoch and John Surman - play nine parts over the two acts; Surman, who plays the father in the first act, becomes a wholly convincing dog in the second.

Imaginative staging, with some lovely set pieces, fuses big themes and big ideas. When the mother dies, her presence remains in everyone's consciousness, as she moves silently above the other players on a high wire. A marvellous and hilarious chorus of geese has been created from a dozen umbrellas. As she escapes, Mary's wooden frock becomes a chastity belt, a boat, a cradle, a cage.

There are a couple of additional surprises. One is that, for a show that depends so heavily on its visual impact, it also has an excellent, darkly lyrical script. The other is that some of the acting is thin and rather underwhelming, a situation rescued only by the fact that The Wooden Frock is essentially an ensemble piece and thus carried by everyone, including the musicians, who play throughout.

The moment when Mary's father finds her wearing the ring is very queasy. "It feels strange now, but it'll soon feel all right: it's what's meant to happen," he tells her as they sit together on a bed. I find it impossible to get the McColgan family, so recently in the news again, out of my head. Later, Rice points out: "Through folklore you can tell stories relevant to contemporary life without being naturalistic."

There is darkness in this show, but there is also much that is delightful, beautiful and hopeful. And the final image, like all folklore, magically achieves something that appears impossible to create in reality, that exists only in fairy tales.

The Wooden Frock is at the Helix, Dublin, from tomorrow until Friday