Twins Judy and Jimmy Barton have written their letters to Santa and are decorating their Christmas tree when they discover that the silver star ornament is missing. After much thinking with their mother, they remember that Uncle Ned put some of the ornaments in the attic so up to the attic they go in search of the star. Instead they find a four inch tall stuffed bear, a quilt and a spyglass. As Jimmy is looking through the spyglass, he sees the bear move which is just not possible. By way of introduction, he sings "I"m the Cinnamon Bear with the Shoe Button Eyes". The bear's name is Paddy O'Cinnamon. He tells the kids that the Crazy Quilt Dragon stole the star and he wants to help them get it back.