Start with an introduction of the parts of speech: noun, verb, adverb and adjective. Keep it simple and give plenty of examples - have the students add their own examples for each category. Encourage them to have fun with this story, using the most interesting words they can think of in each gap.
Explain that this story takes place in the past so the verbs will need to be in the simple past form.
Check that they are using the right types of words (as indicated in the brackets). Have them read their stories out loud and be encouraging about any funny or creative choices.
As an alternative, if you feel the students are confident enough, have them first write down a word for each category required on the worksheet (before showing them the worksheet), then have them fit them in and read them out loud - there might be some funny results!
Check that the word written in each gap is of the type indicated in the brackets.
For example:
On a warm afternoon, a big giant walked through the forest. He was feeling happy.... etc.
Possible solutions:
warm
big
happy
going
kind
strongly
delicious
happily
best
big
small
quickly
laughed
a hat
dancing