Lucky Isles is full of Dead Land and Super Dead Land and has 4 possible Destroyed Gaia Statues, 3 within demon gates. The small island in the top corner is not visible when first viewing the level and contains grass dragon eggs and cloudy summits.
- merge the grass dragon egg with the adjacent four grass dragon eggs on Dead Land
- merge the 3 life flower sprouts
- let a dragon harvest 3 life essence
- merge 2 life essences in the bottom left corner of the level. Leave the resulting tiny life orb for the moment as the heal extenders will open up the rest.
- merge the other life essence with the other 4 in the centre of the level to free a grass dragon egg. Save these tiny life orbs for later.
- let the dragons shoot the demon gate
- merge the grass dragon egg with the other 3 in the upper left corner of the level to free the cloudy summits
- activate a rain cloud and let it rain!
- merge a puddle in the upper left corner (right from the cloudy summit island) and let the dragons destroy the demon gate.
- tap the Shrub Sprouts you opened up in the beginning for magic mushroom caps
- merge 3 mushroom caps to create magic shroom cluster
- merge 1 magic shroom cluster with the other 2 on the centre/left.
- now you have unlocked 2 fruit tree sapling almost next to each other.
- drag and merge them on the island where the goddesses of healing are.
- merge as many Shrub Sprouts as you can (should have 9 now. 8 ones are open, the other 1 is in the beginning but you can place them next to it)
- merge 5 Shrub Sprouts, then merge 3 budding shrubs to create a Nice Shrub on the island in the centre with the 2 bananas in the super dead land.
- use the tiny life orb you saved from before to heal up the rest of the island where the 2 bananas are on. You should have at least 5 Shrub Sprouts again, and opened up the level 2 budding shrubs. Merge them all together and you have now have 2 Nice Shrubs.
- merge the 3 Nice Shrubs, tap the heal extender, let the dragons destroy the demon gate.
- merge the destroyed gaia statues and you win the level
reference: http://forum.mergedragons.com/showthread.php?630-Challenge-15, written by J_CRISIS_J
Challenge Walkthrough Edit
Merge the grass dragon eggs. Merge the life flower sprouts and harvest for one life essence. Merge the life essence on the island with 5 life essences. Have dragons shoot the demon gate. Grab the egg off that island and merge it on the upper left island. Make it rain. Merge the rain puddle on the top middle island. You now have two destroyed Gaia statues.
Harvest the shrubs at lower right and merge 5 mushroom caps. Merge the shrubs and immediately tap and then harvest the budding shrub to get more mushroom caps. The goal is to get the lvl 3 magic shrooms to merge on the island in the top right.
After merging the magic shrooms on the top right island, heal land the demon gate is on (it only needs one life essence).
Shoot the demon gate and merge the three destroyed Gaia statues.
Thanks to Glaucus atlanticus (moved this up from the comments)