Tim and Rose search the mysterious woods for their beloved cow Lucy, only to come face to face with Badjelly, a horrible witch terrorising the valley.

Tim and Rose meet Binklebonk, a tree goblin living in fear of the Beast of the Backwoods. They agree to help, only to discover a mechanical beast.

The path to Mudwiggle's ferry leads the gang through the lair of the Unfungi, a grumpy old hermit who lives in a cave full of puzzles and traps.

The gang finally make it to Mudwiggle's ferry, only to discover the river is closed for Shark Thursday. They make a deal to pass by unharmed, which turns sour when a light splash sends the sharks into a frenzy.

The gang encounter an enchanted apple tree who is also a police officer. He points them in the direction of Bearded Mountain down a path that leads through a dangerous field of confusalilies.

The gang stumble into a mysterious grotto, only to be captured by Dinglemouse, a rodent who used to be a banana. When they help her defeat Dulboot, she joins them on their quest to find Badjelly.