"Battered" means beat-up, ragged, or worn down. "Felt" is a kind of material, a soft kind of cloth. The hat is made of felt. So another way of saying the first sentence is, "he had kept on his beat-up old cloth hat".
"Draggled" is not a common English word. Usually in English we would say "bedraggled". "Bedraggled" means his mustache is stringy, worn, maybe dirty. He does not take good care of his mustache.