Toto! The Wonderful Adventure Vol. 2 by Yuko Osada

Main character: Kakashi and Dorothy
Location: An alternate world
Time period: Seems to be contemporary-ish
Genre: YA Manga, Fantasy

Kakashi and Dorothy manage to get out of the house only to find it surrounded by the army and a large monstrous creature. They are told that the creature is Toto--but Toto is not supernatural, it's the collar that he wears. It is one of 12 powerful accessories--ooh, do we see a quest storyline coming up? Sakura's feathers from Tsubasa; the shards of the Rikon jewel from InuYasha; and now these accessories. Anyway, the army fires upon Toto to Dorothy's dismay, Kakashi goes to comfort him, and, entering another dimension where Toto still appears to be the cute little puppy he is, merges with Toto. Now Toto's collar is on Kakashi's wrist and in times of stress Super-Toto appears at the end of Kakashi's arm.

A new military character is introduced--Corporal Chopin, who seems to have one of the accessories. He turns his wrath on the military leader that bungled the retrieval of the bracelet and Dorothy and Kakashi escape. They make their way to Dego City, also known as Locomotive Town. Unfortunately, they arrive just as the last locomotive is being crushed into scrap metal to make weapons for the army. Kakashi is being such a bumpkin that he attracts attention, but a girl comes up and claims him as her brother. Millica takes them in and tells them what is happening in their town. They also meet Noil, a soldier who has a talent for building locomotives but would rather be an entertainer. And he's got a crush on Millica. When the military tries to capture Kakashi again, Noil has to choose between his duty to the army and his love for Millica.