To awaken the slumbering wizard, light all four Tea Lamps in the level. Bubba, a resident of Spooky Swamp, will then allow you to go through.
Sleepyhead will start by waking up and throwing a bomb at you. Once landed, charge the bomb back at him before the timer dies out.
He will then summon three Gators. Defeat them all to make it easier, and he will proceed with throwing another bomb at you.
Continue charging the bombs at him until his HP is depleted it will take four hits of the bombs to defeat him. And you will be given the Dragon Egg containing Herbi.