This bonus level is located on the top floor of the castle, in the same area as Tick Tock Clock and Rainbow Ride. That means you will need at least 50 Power Stars before you gain access to the floor. Once you are there, face Tick Tock Clock and look to the left to see a large hole in the wall. Jump into this opening to find a smaller hole, which leads to this bonus stage. The goal of the bonus stage will be to collect eight Red Coins to spawn a star.
You start out this bonus stage on a cloud, with Red Coin #1 right behind you, as well as a Wing Cap block right in front of you. The Wing Cap and cannons will be your main source of getting around here, but the cannons are closed until you find the Bob-Omb Buddy. All of the clouds are connected via rainbows, so you will know where said clouds are located. Straight behind you, past the Red Coin will be a slightly lower cloud, so fly there first to collect Red Coin #2. Look below you and you should see a large pink-colored platform, so head there to find Red Coin #3.
This is also the location of the Bob-Omb Buddy, meaning you can finally open the two cannons on the level, one of which is on the same island. Returning to the beginning cloud, if you look around, you should see a coin inside a cloud above your current location. There’s also a bigger cloud higher up that has some poles underneath it. There is another lower cloud that has a Red Coin, which isn’t too far from the island with the Bob-Omb Buddy. This will net you Red Coin #4, then you can fly to the cannon below you to return to an upper cloud. There should be a small pink platform that contains a cannon, so head to that and blast off towards the transparent cloud with Red Coin #5.
If you can, return to the cannon and shoot yourself at the myriad of poles below the big cloud at the top of the level. There will be Red Coin #6 amongst the poles and while it would be nice to not grab one of the poles, it’s not the end of your little journey here. The reason for this is there’s a cloud right below you, but you will want to drop from the middle pole with the coin, just to be on the safe side. Return to the same cannon on the little island, then launch yourself to the top of the large cloud, where you will find Red Coin #7 and Red Coin #8. The star will spawn on the starting cloud.