Learn Hardcore German: In meinem Etagenbett oben kann ich gut schlafen, wenn ich meine Ohrstöpsel benutze. - In my bunk bed on the top I can sleep well when I use my earplugs.

The first position here is the prepositional phrase In meinem Etagenbett oben.
Because position 1 is already taken, the finite verb (kann) must be in position 2.
The subject ich then comes after the verb.

If you start with the subject instead, you get normal SVO word order:

Ich kann in meinem Etagenbett oben gut schlafen, wenn ich meine Ohrstöpsel benutze.

Both are correct; the sentence in your example just chooses to emphasize the place by putting it first.

Why is it meinem Etagenbett and not mein Etagenbett?

The form meinem is dative singular, and in here is used with a location, which requires the dative.

Bett is neuter: das Bett.
The compound das Etagenbett is also neuter.
The preposition in can take either accusative (motion) or dative (location):
- Motion (accusative): Ich gehe in mein Etagenbett. (I go into my bunk bed.)
- Location (dative): Ich liege in meinem Etagenbett. (I am lying in my bunk bed.)

In your sentence we are talking about where the person can sleep well (a location), not moving into it, so in meinem Etagenbett is dative and therefore correct.

What exactly does Etagenbett mean, and is it always a bunk bed?

Etagenbett is a compound:

die Etage – floor, storey, level
das Bett – bed

So das Etagenbett literally is a "story/level bed" and normally means a bunk bed: one bed above another on a frame.

If you just mean a bed on an upper floor of a house, you would not say Etagenbett; you’d say something like:

das Bett im ersten Stock (the bed on the first floor).

Why is oben in In meinem Etagenbett oben and not somewhere else? Can it move?

Yes, oben (meaning on the top / upstairs / on the upper level) is quite flexible in position. All of these are possible and natural:

Oben in meinem Etagenbett kann ich gut schlafen …
In meinem Etagenbett oben kann ich gut schlafen …
Ich kann oben in meinem Etagenbett gut schlafen …

The meaning is essentially the same: you are talking about the top bunk of the bunk bed.

Two notes:

oben here describes the upper bed, not just "upstairs in the house."
You would not usually say auf meinem Etagenbett for "in the top bunk." You normally sleep in a bed → in meinem (oberen) Bett, not auf meinem Bett (that sounds like lying on top of it, not tucked in).

Could I say In meinem oberen Etagenbett instead of using oben?

You could say something like:

In meinem oberen Bett kann ich gut schlafen …

but In meinem oberen Etagenbett sounds a bit unusual, because Etagenbett is already the whole bunk-bed unit. You typically specify:

im oberen Bett (in the upper bed)
im unteren Bett (in the lower bed)

So the most natural options are:

Oben im Etagenbett kann ich gut schlafen …
Im oberen Bett kann ich gut schlafen …
In meinem Etagenbett oben kann ich gut schlafen … (colloquial but understandable)

Why is it wenn here? Could I use als or wann instead?

wenn, als, and wann are easy to mix up:

wenn = when(ever) / if for:
- repeated events in the past, present, future:
  - Wenn ich früh aufstehe, bin ich müde.
- conditions (if):
  - Wenn ich meine Ohrstöpsel benutze, kann ich gut schlafen.
als = when for a single event in the past:
- Als ich klein war, hatte ich kein Etagenbett.
wann = when? for questions (direct or indirect):
- Wann gehst du ins Bett?
- Ich weiß nicht, wann du ins Bett gehst.

In your sentence it’s a general condition / repeated situation, not a single past event, so wenn is correct. als and wann would be wrong here.

Why does the verb go to the end in wenn ich meine Ohrstöpsel benutze?

This is a subordinate clause introduced by wenn.

In German:

Main clauses: verb in second position
- Ich kann gut schlafen.
Subordinate clauses: finite verb goes to the end
- …, weil ich müde bin.
- …, wenn ich meine Ohrstöpsel benutze.

So the pattern is:

wenn
- subject
  - (objects/adverbs)
    - verb at the end

→ wenn ich meine Ohrstöpsel benutze

Why is it meine Ohrstöpsel and not something like meinen Ohrstöpseln?

Several things are happening here:

Ohrstöpsel is plural:
- Singular: der Ohrstöpsel (earplug)
- Plural: die Ohrstöpsel (earplugs)
  The plural form doesn’t change: singular and plural look the same.
meine is accusative plural for mein- words:
- Nominative plural: meine Ohrstöpsel
- Accusative plural: meine Ohrstöpsel (same form)
meinen Ohrstöpseln would be dative plural, e.g.:
- Mit meinen Ohrstöpseln kann ich gut schlafen. (With my earplugs I can sleep well.)

In wenn ich meine Ohrstöpsel benutze, meine Ohrstöpsel is the direct object (accusative plural), so meine Ohrstöpsel is correct.

Is benutzen a separable verb? Should it split in this sentence?

No. benutzen is not separable. It doesn’t have a separable prefix like auf-, an-, mit-, etc.

Infinitive: benutzen
1st person singular: ich benutze
In a subordinate clause, it just stays at the end, unchanged:
- …, wenn ich meine Ohrstöpsel benutze.

Compare with a separable verb like aufmachen (to open):

Main clause: Ich mache das Fenster auf.
Subordinate clause: …, wenn ich das Fenster aufmache.

With benutzen, there is nothing to separate:

…, wenn ich das Fenster benutze.

What is the difference between kann ich gut schlafen and just schlafe ich gut?

Both are grammatically fine but have slightly different nuances:

Ich schlafe gut. – a neutral statement of fact: I sleep well.
Ich kann gut schlafen. – focuses more on the ability / possibility: I am able to sleep well / I manage to sleep well.

In context with earplugs, kann ich gut schlafen suggests:

Under that condition (using earplugs), it is possible for me to sleep well,
i.e. normally it might be harder, but with earplugs it works.

You could say:

In meinem Etagenbett oben schlafe ich gut, wenn ich meine Ohrstöpsel benutze.

That’s also correct and just a bit more neutral.

Can I start the sentence with the wenn‑clause instead?

Yes, that is very common in German. If you start with a subordinate clause, the next verb in the following main clause must still be in second position, so it directly follows the comma:

Wenn ich meine Ohrstöpsel benutze, kann ich oben in meinem Etagenbett gut schlafen.

Structure:

Subordinate clause: Wenn ich meine Ohrstöpsel benutze (verb at the end: benutze)
Comma
Main clause with verb in 2nd position: kann (1st element in the main clause), ich (2nd element), etc.

You must not say: Wenn ich meine Ohrstöpsel benutze, ich kann … – that would violate the V2 rule in the main clause.

Why are In, meinem, Etagenbett, and Ohrstöpsel capitalized or not capitalized like that?

German capitalization rules involved here:

Nouns are capitalized:
- das Etagenbett, die Ohrstöpsel → Etagenbett, Ohrstöpsel
Articles, pronouns, adjectives, prepositions, verbs are not capitalized in the middle of a sentence:
- in, meinem, oben, kann, gut, schlafen, wenn, ich, benutze
The first word of the sentence is capitalized:
- In (capital I because it starts the sentence, not because it is a noun)

So the capitalization in In meinem Etagenbett oben kann ich gut schlafen, wenn ich meine Ohrstöpsel benutze. exactly follows standard German rules.