Observing and analyzing the microstructure of zone samples had been an essential concept in the study of co-fusion steelmaking. High-temperature confocal laser scanning microscope (HT-CLSM) provided a new method in the in-situ observation and real-time analysis of the co-fusion steelmaking process. In this research, a series of experiments had been designed based on Shen Kuo's The Dream Pool Essays (a famous ancient Chinese literature) and carried out by HT-CLSM. The results showed that a new interface was formed with the phase transition during the heating process, which had an essential influence on promoting the carbon diffusion rate in co-fusion steelmaking. The cast iron zone occurred in mushy solidification because of decarbonization. There were collision, aggregation, and other behaviors of inclusions in the cast iron zone and they moved towards the boundary, which led to the purity of the matrix and the aggregation of a large number of inclusions at the boundary.