Peace Isles is a straightforward level, but a surprisingly long one for one chalice.
There are three places you can merge the two initial mushrooms with one on dead land. Two of them give you a Golem egg you can merge with two other ones. The one on top gives you a nest that usually lets you have two dragons, and better life flowers to start with. Be careful, though, about healing too many of the very limited number of bones that you need to merge while still on dead land.
In any case, you have to start out by making some life orbs and releasing them carefully so as to free some of the piles of bones which you can spread and merge with bones on dead land, while also trying to deal with zomblins that will emerge before you can make much progress on healing the land. If you start with only one dragon, zomblins will kill a few squares of land before you can kill them. Just make sure they don't take away your only life flower.
TIP: When a zomblin starts to kill a land square, move a bone onto that square and keep your dragons from killing it until it's done. When you merge the bone later it counts toward the goal.
After five or six zomblins, they will stop coming so quickly, your goal to kill them will be complete, and you can focus on the merge bones goal. Once that is done, focus on merging to heal the other super dead land, create more dragons, and farm life orbs until you can make a furious life orb, which will heal most of all of the dead land you have left by that point.
TIP: Make a combo and burst the combo bubble on the Shrub Sprouts on the right edge of the map. This square is dead only 1 unit, so will be fully healed. Then make Life Orbs and burst them here, trying to heal the Life Tree Sprout (level 8) on the square just below that. This one takes 50 units to heal, but the Life Tree Sprout harvests for Life Orbs (level 3) which will allow you to much more quickly heal the rest of the land.