Let's take things in order.
1) Right This is short for "All right", a general term of encouragement.
2) ten digits around the blunt bit Sticking out of the rock is the sword, consisting of blade and hilt. The blade is sharp, while the hilt is not, and blunt is an antonym of sharp. Fingers are also called digits, and you have ten of them, five on each hand. So grab hold of the hilt with both hands.
3) Give it a tug To tug an object, or give it a tug, is to pull on it. So pull the sword out of the stone.
4) Left foot, right foot This is the process of walking - you put your left foot forward, then your right, and repeat as necessary. So take the sword and show it to whoever you need to.
So a paraphrase might be, Here's what you need to do. Grab the sword. Pull it out of the rock. Collect your reward.