Hand a Green Gem to the Barker Imp at the Dugald Forest, You will be transport to the Dream Scape as an Imp. To earn stars, you simply have to defeat the Ogres. However, without the Power Mushrooms that appear randomly on the map you cannot defeat an Ogre. Eating the Power Mushroom you will gain "the Giant" title and transform into a Giant Imp. Defeating the Ogre while you are in Giant form will net you 5 stars, if you have hit at least once at the Ogre as a little imp will earn you 1 stars. To trade the stars, talk to the Sassy Imp at the beginning and select the option to wake up then trade in the stars.
Here's the reward list for the Imp's Dream Event:
(The following are counted in little stars, 1 big star is 5 little stars)
1-4 star: 50 Potions of various kind x5~10
5-6 star: 100 Potions of various kind x5~10
7~9 star: Fine Leather x5~10 or Finest Fabrics x5~10 or Likeablility Potion x1 or Wooden Board x2~3
10-14 star: Wooden Board x2~3 or Finest Leather x2~4 or 300 Potions of various kind x3~5
15-19 star: 300 potions of various kind x5~7 or Finest Leather x5~7
20-24 star: Wooden Board x2~3 or Finest Lather x7~9 or 300 Potions of various kind x6~10
25~27 star: Mass Holy Water x3~5
28+ stars: Golden Herd x10 or Elven Magic Powder x1 or Unknown Advanced Enchant Scroll x1
*Fashion Goggle will have a chance to appear as long as you have more than 1 big star*
*Misc. other items you may get at each ranks: Fine Fabrics, Phoenix Feather, # Signs, Mana Elixir (Not Confirmed)*
Meant to type this out earlier but too busy moving house yesterday
*P.S. The Finest Leather/Fabrics and Wooden Boards are real nice materials to farm from the event!*