I have managed to do this, after a very long frustrating few weeks!
The strategy was to exploit the start where you have one neighboring worm in your section. A simple fire punch (or dragon ball... the blue punch) almost immediately kills this worm, who can then be easily finished off.
Then, simply wait (skip go's if necessary). Packages will teleport near you, and some enemy worms will teleport to get them. These can then be killed in one go, simply by pushing them in to the water. Keep doing this until no more worms come to you (this method also exhausts their teleports). Using this method, I got rid of all the worms on the left side of the level.
Now the tough stuff begins. Making sure you track which enemy worm is next, slowly make your way over to the right, one section at a time (via blowtorch), and kill the enemy worms you encounter. This is possible as there are still a fair few enemy worms left, so you have enough turns to use the shotgun etc.
You'll (probably) be left now with a small nest (3-4) of worms in the lower right corner, and 2-3 worms in the upper right corner. As soon as an opening appears, throw the holy grenade in to the left corner: we need to completely destroy the landscape here. Make sure you still have the next turn free, as this will leave you wide open to next-go attack (use girders to plug the opening if necessary, to stall them).
If you are lucky, you can kill all the lower-left worms in one go. However, as I found, this usually needs 2-3 go's (tip: a banana bomb, thrown so as it bounces little, will release its follow-on bananas close by, so this is very useful for destroying a lot of land.)
Now, you should be left with 2-3 worms in the upper right corner. Use the bit of time you have here to open up the water in the right side of the level. The plan is to do this as much as possible, then teleport away (once you are in danger ie the upper right worms have made an opening in the landscape to fire at you) to stock up on health crates. Once you are safely away, look to use the earthquake to simply drop the remaining worms in to the open water.
If, however, the last worm decides to blowtorch up and to the right (this happened to me), use a girder to 'block' him in. This is tricky with the controls, but you have plenty of time to manage it. Then, with high health levels, teleport across (behind the girder), and do everything you can to blow the worm off the course (eg. blowtorch underneath him, then pack the tunnel with dynamite. Done right, you can simply push him off the course next go).
Good luck! This is a horrible, frustrating level, but so satisfying to defeat!