Where is the stolen baby Rattle

The thresholds for prizes here are 15, 20 and 28 cuts. The highest I was able to get (with the plain Goddess Sword BTW) was 37 which was mostly luck I'd say. The Sheikah Stone nearby mentions that Peater set the record at 42 43. The hardest thing about this game is that the controller isn't sensitive enough and doesn't pick up all your movements correctly which is frustrating.

It's not worth your time IMHO. For the first level, you get 30 rupees which is rather weak. The next level you get some common treasure (e.g., a Monster Horn). The last level you get a rarer treasure (e.g., a Blue Bird Feather). You might be able to get something if you beat that record but I have yet to reach it myself, even with the (long) Master Sword. Save it for later when you've done everything else in the game.

I finally managed to get 45 cuts and all I got for it was the Goddess Plume (another rare treasure). Don't waste your time on this, there are other ways you can get those rare treasures.

From this walkthrough:

If you ask the people in Skyloft, you’ll learn that Kukiel was seen playing near the graveyard. If you head towards the graveyard you’ll meet a woman who will tell you that one of the villagers, who is considered crazy, is always talking about a demon that lives in Skyloft. She’ll also tell you where to find him: Pumpkin Landing.

Pumpkin Landing is another island that is southeast of Skyloft. Dash off Skyloft, call your Loftwing, and head that way!

Once you’re there, enter the only building on the island, the Lumpy Pumpkin. You’ll find the old man inside having a drink. Speak with him and you’ll learn that he saw the demon in the graveyard at night. He’ll also tell you how to find the demon!

Head back to Skyloft and sleep in a bed until night. Then, head to the graveyard. Once you’re there, follow the instructions the old man gave you:

Find the gravestone closest to the large tree. This will be the gravestone in the top-left corner of the graveyard. Roll into the gravestone. You can roll by shaking the nunchuk while sprinting. If you do this correctly, a glowing symbol will appear on the gravestone. Push the gravestone. When you do, the door of a nearby storage shed will open and reveal a ladder. Go down the ladder and follow the path. At the end, you’ll find a house and hear a scream. When you enter the house, you’ll find Kukiel and a bat-like monster who will roar loudly when you enter. However, when you try to attack the monster, he will cower in fear and beg you not to hurt him.

The monster’s will introduce himself at Batreaux and convince you that he only wishes to be friends with the people of Skyloft, but due to his terrifying appearance no one – except the child Kukiel – will spend time with him.

Batreaux will then ask you to find Gratitude Crystals for him so that he can become a human. This begins an extensive side quests that is tied to all of the others.

Batreaux reminds you that it is dangerous at night, so Kukiel is staying at his home until morning. He promises that he will then send the child home.

Return to a bed and sleep until morning. Then, head to Kukiel’s home. She lives in the house next to the bridge in Skyloft. Inside, you’ll find Kukiel safely at home. Speak with her mother to receive five Gratitude Crystals.