If you completed all 29 levels with gold medals before badges were added (like I did), just replay one of the levels and it'll re-credit you with everything.
the fairy was under the blue shell for me. however i do know that if you call the guards on the guy, later on in the game you get a "summon" to the Dark and you fight some thugs and you get 150 gold from them when you win, so it would seem like it's more beneficial to report him to a guard than to actually play the guessing game
 "Splitter Pals"){kind=icon}
 "Doodle Devil"){kind=icon}
 "Sieger"){kind=icon}
 "Moby Dick - The Video Game"){kind=icon}
 "Talesworth Arena: Death Watch"){kind=icon}