Step 1: Go to Magic Beans from Gnome's Island
The Gnome has the magic beans that he will reward you if you guess his name. You'll need these or the key (if you don't guess his name) in order to get to the Giant's Cloudland. To see how to get onto the Gnome's Island, the beans or key, see the Gnome's Island page.
Step 2: Plant Magic Bean
Step 3: Climb beanstalk
When the beanstalk has finished growing, climb it be using an action. This will begin the climb. You will then need to direct Graham up the beanstalk, which can be fairly difficult until you get use to it. It's a good idea to save the game before starting up the beanstalk, and maybe a few points in between, if you're new at this. A tip for climbing is keep your clicks near the lower edge of the beanstalk. That typically keeps Graham from falling off. If you do fall off, Graham will not survive the fall.
Step 4: Get slingshot
Once on top of the beanstalk, walk straight to the right until you get onto green land. If you don't, Graham may come plummeting back to the ground. Look at the map of the Giant's Cloudland and make your way to the area with the slingshot in it. Get the slingshot by using an action on the hole in the tree. In this scenario for getting the Magic Chest, you won't need to use the slingshot. However, you get experience points for picking it up.
Step 4: Avoid Giant until he falls asleep
Before you go to the Giant's location, you may want to put on the invisibility ring. Enter the Giant's area and either keep moving around or sit with the invisibility ring on. The Giant will tier after about 20 seconds, fall down, go to sleep and drop the chest.
Step 5: Get Magic Chest
Once the Giant drops his chest, you can pick it up. Don't worry, he won't wake up no matter how much time you spend doing this.
Step 6: Leave though cave
Now that you are on the top of the clouds with the Magic Chest, you have to get back down. You can go back down the beanstalk, but that is as tricky as climbing it. You can exit though the cave a bit easier (even if you didn't come up that way).
While navigating the boardwalks in the cave, be careful not to fall, but also to keep moving as quickly as possible. The Dwarf may show up, and he is very hard to avoid in such a tight space. You may want to use the invisibility ring to get though the caves.
Once at the bottom, you can exit out the door and you are back in Daventry, plus one lost treasure.
There are other ways of completing this task, but the method above results in the most experience points. Here are the two variations you can use.
Entering the Giant's Cloudland though the caves
If you don't guess the Gnome's name correctly, he will give you a key rather than Magic Beans. Instead of climbing the beanstalk, you can open the door in the mountain in E7. This will take you to the boardwalks that lead to the Giant's Cloudland.
Using the slingshot
Rather than avoiding the Giant, you can use the slingshot on him and knock him out. To do this, you will need pebbles and the slingshot. Then, when you enter the Giant's location, use the slingshot on him. Graham will quickly take aim and a pebble will strike the Giant on his head. He will fall to the ground and drop his chest. This method is worth less points, but also gets the job done.