Hi, I’m not sure about the whole sentence, but I think I can help on the “いっしょうけんめい はたらいて いて” part. For me it means “was working very hard”.
はたらいて います is “currently working”, and it’s put here in the て-form はたらいて いて
“Suddenly he saw the lumberjack working very hard, and that a piece of bread was put on the top of the tree trunk”.