Kindly Papa Piper puts on shows with puppets that look just like Wendy, Gnewton, and others of the forest folk. Meanwhile, Wartley Warlock tells the Witch Sisters of his plan to make the forest a home for witches only, but doesn't say how he's going to get rid of the others. They tell Wendy of the plan, and Casper overhears. Casper then spots Wartley in the woods with some of Papa Piper's puppets, and the next day witches begin moving in to the homes of the residents who have puppet doubles, all of whom are missing.
The forest folk go searching for Wendy, Gnewton, and their other missing friends. Casper searches on his own and comes to the gate of a fairytale kingdom called "Fairytale Kingdom." The soldier at the gate tells him that Papa Piper's puppets were caught stealing. Casper asks Papa Piper about it, and Piper says that evil magic has made them steal, and that they are now in the fairytale king's dungeon. Casper has an idea and starts looking for something.
Casper finds the puppets in a cave and realizes that the puppets in the dungeon are actually the real people, turned into puppets. He tells Wendy's aunts, who chase Wanda and the other witches out of the forest homes. Casper finds Papa Piper and tells him the story, and they head for the dungeon, where Casper removes the puppet spell with Wendy's wand. When Piper locks him in with the others, Casper realizes that he's Wartley in disguise. After escaping, Casper, Wendy, and the others confront Wartley and drive him away.