The first level of the arcade game unlocks with 7 Jiggies banked but you will need 30 total to unlock all levels. The fifth and final level does not unlock until you pass the first four levels. All you need to do it time your jumps with the A button to complete each level. The first three are rather easy but level four will definitely take some time. Eventually you will learn each "sweet spot" for jumping and once you can memorize the entire level you'll pass it. The final level against Grunty you simply need to jump once, but you have to jump a split-second after the fireball leaves her mouth or it will hit you.
Note: At times the game will freeze and Klungo will have to reset it. This is not a glitch with your game, this is just Rare thinking they are funny. It is annoying, but don't let it get to you.