Read with Lili's voice :
Lili wants to paint a sleeping elf. Lili asks for a someone to pose for Lili. Ilia the dragon volunteers. Ilia's a dragon, not an elf. So instead of painting a sleeping elf, Lili is going to paint a sleeping dragon. Lili helps Ilia into "Lea's sleeping pose", then proceeds to start the artwork. However, Ilia is not actually sleeping.
So Lili is painting a naked dragon.