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The Egg is in the Cove ;) 

Garry you're right the grubs are needed to get the treasure you need. 

Lush Moss (drop it somewhere), Alcove, Empty Cage, Submerged Passage they're the ingredients to this. ;) 

I tried that, but nothing happened. I think The grubs might have disappeared, but they reappeared again at some point. Also tried leaving the room and coming back. I must have missed something. I'll try again after playing the other games.

Well I just played through it start to finish and the grubs were caught as intended. :) So it's definitely working. Not a bug which I was worried I'd somehow introduced. 

When you drop the Moss in the alcove look again just to make sure they're nibbling the Moss. ;)