Maddie and Mike discuss where Katie is. Maddie confesses that Katie is as worried about Henry as she it. Meanwhile, at WOAK, Katie puts her plan in action. When BJ shows up, she pretends that she and Mike have had a terrific fight and she breaks into tears. BJ comforts her and asks her to come back to Fairwinds with him to get over Mike. Katie agrees as long as Henry won't be there to bother her. BJ assures her that Henry is on a business trip and will be nowhere around. Mike suddenly rushes in and stops them from leaving.
Meg and Dusty are cleaning up the Thanksgiving dishes at Emma's farm. They talk about moving in together, and Dusty is pushing for it. Meg finally agrees and gets out her old Hope chest that contains many memories from her childhood.
Jen visits Will in jail and Barbara shows up. Barbara has been in contact with Will's psychiatrist in hopes of getting Will out of jail. Will cannot believe his mother thinks he poisoned Iris, and Barbara gets furious with Will. While they are arguing loudly, Gwen arrives and Jen leaves in a hurry. Gwen and Barbara argue over what is best for Will.
Iris and Stan arrive at Iris' house very pleased with how well their plan to frame Will is working. Stan is disappointed that the police have taken all the liquor in the house to test it and proposes they adjourn to Yo's to have a drink. Iris does not feel all that well and asks Stan to drop her off at the pharmacy so she can fill her prescriptions.
Gwen finds Carly and asks for help with Will. Carly wants to help and asks Gwen to trust her. She has figured out that Iris is setting Will up to get rid of him. Gwen takes the baby to Carly's house for the sitter to watch and Carly leaves for Iris' house. She is sneaking around the outside when Jack suddenly grabs her. He tries to talk her out of committing another felony by breaking and entering.
A very distressed Jennifer goes to Yo's for a meeting with her drug supplier. He is furious that he lost all his last supply to Dusty and was never paid. He tells Jen she needs to pay for that shipment as well, or he won't sell to her. Jen agrees to pay and gets a small supply of crystal meth. She almost takes the drug but then finds one of Billy's toys in her purse and breaks into tears and hurls the drug away. Kim finds her sobbing on the ground and takes her away.
Back at WOAK, Katie berates Mike for interfering with her life again. Mike is confused by Katie's behavior but is convinced to leave when one of BJ's "security" men arrives with a gun. The gunman roughly escorts Mike out.
Carly arrives at Yo's dressed like a dance-hall girl and puts the moves on Stan who is sitting at the bar looking for someone to talk to. He starts babbling about coming into a great fortune in a few weeks. Back at Iris' house, Jack goes into the house himself and finds a folder containing newspaper articles about Will and how he poisoned Rose. Iris surprises him by arriving home and begins to come on to him.
Mike gets delivered back to Katie's house where Maddie is still waiting. He calls Katie and lets her know he is wise to what she is trying to do and tells her she had better be home in two hours or he will come to Fairwinds looking for her.
At the farm, Meg finds a plane ticket to Alaska and Dusty asks her if that represents her way out if she needs to get away from him. Meg suggests that they burn the ticket.
At the jail, Gwen and Will kiss through the bars of his cell and declare their love for one another.
Carly's got Stan right where she wants him until the tape recorder she was using falls to the floor. She grabs it and covers. Stan excuses himself and it's then that Gwen runs in, desperate to see if Carly has been able to get proof of Will's innocence. Carly assures her she is working on it, but Stan spots them together and makes a run for it. Meanwhile, Jack is able to cover in front of Iris and take the file on Will's past. Later, when Stan returns, Iris realizes that Jack and Carly are onto them and they decide to leave town, and Billy, who is in Iris's care. Meanwhile, Jennifer is doing her best to cope with her pain and explain to Kim the connection she feels to this baby that she knows is not hers. She decides she needs closure in the matter. She heads to Iris's and comes upon the baby all alone, having been abandoned by Iris. Meanwhile, Will gets the bad news that until proof of his innocence is revealed, he is being forced to return to the state mental hospital. There, he comes dangerously close to losing it completely. But, thanks to Gwen, Carly and Jack's fierce determination, there is a light at the end of the tunnel when Hal gets called away to look at the evidence Jack and Carly collected. In a misguided attempt to make Luke more comfortable, Lily brings some of his things to Emma's. But, Luke's in no mood to be soothed by a mother he feels has abandoned her family to be with another man and storms off, leaving Lily in tears. Meanwhile, Holden's certainty that Lily exchanged a promise of marriage for Luke's kidney is in doubt when the Private Investigator confirms the legitimacy of Luke's kidney. But, Holden confronts Lily and demands that she tell him the truth once and for all.
Gwen asks permission to see Will and though Barbara protests, the doctor allows it. Gwen is strong and loving with Will and calms him a great deal. Later, when Gwen returns home, she finds Jennifer taking care of Billy. Jennifer explains how the baby was there alone, and then a shaken Jennifer takes off. Gwen returns to the padded cell with a concealed baby and Will vows to do whatever it takes to clear his name so he can be a family with Gwen and Billy. Meanwhile, Jack and Carly meet with Hal who thinks their evidence is good. He puts out an APB for Iris and Stan and gives Jack and Carly tacit approval to keep working on the case. They get a clue and head to Burt's Garage, just as Stan and Iris are taking off. But, Jack grabs Stan from the car, and prevents them from leaving. Dusty and Meg happily shop in preparation for moving in together. Meg runs into Emily and Paul who remarks on Meg's happiness. Meg reveals her guilt over what they did to Jennifer but keeps her cover in front of Dusty. Later, Jennifer spots Meg and Dusty coming out of a store and is hit hard with the realization that they're moving in together. Meanwhile, Paul is worried about both Meg and Jennifer's emotional states and sets a plan in motion to get Jennifer out of town. Having confronted Lily, Holden waits for her to admit that Keith blackmailed her into marriage but Lily reveals nothing. When Keith arrives, he demands to know when Holden is going to finalize their divorce. Holden privately tells Lily that he is going to prevent her from making this mistake by not granting her a divorce, while vowing to Keith he will fight for his marriage.
Paul finds Gwen has smuggled Billy into the padded cell to see Will and voices his concerns about Will's attachment to Gwen and her baby. Will stands firm and demands Paul recognize Gwen and Billy as apart of his life. Meanwhile, Jennifer runs into Meg and Dusty, the happy couple, and while she bears a brave face, her heart aches with the fantasy of having Dusty and her baby to celebrate the Christmas holiday. When she sees Paul, she tells him about a telegram she received from a friend in Europe, which Paul orchestrated, and says that she wants to go there and not come back. Meanwhile, after seeing Jennifer alone while she has Dusty on her arm, Meg's guilt continues to plague her. Katie successfully convinces BJ that she and Mike have broken up and comes close to discovering Henry in BJ's wine cellar. However, between Mike's arrival and Olga's ability to keep Henry hidden, Katie's rescue mission is thwarted. But, despite her difficulties, she remains determined that she will find Henry when she discovers a receipt, proving BJ is holding Henry captive. At Burt's garage, Carly and Jack successfully apprehend Iris. She attempts an escape and tries to take Carly hostage but Carly and Jack ultimately prevail. However, Stan takes off to save himself but is later apprehended. Hal arrives with back up and takes Iris into custody. Hal then comes to Will in his padded cell with the good news that with Iris and Stan's arrests, Will is free to go. They return to Iris's house but when Hal arrives to take Will home, Carly offers Gwen a place to stay at her house and Gwen happily accepts.
Henry had a bonding experience with Olga over a bottle of wine in the wine cellar at Fairwinds. Olga told him about her ex-boyfriend, Vanya, who dumped her, and they commiserated about their love lives, finding "common ground," as Henry put it.
Katie told Mike that he had to move out of their cottage because she had told BJ she was throwing Mike out. As they were talking, BJ arrived, so Mike slipped outside to hide while Katie tried to get rid of him. Outside, Mike ran into Maddie and explained to her what was happening; she thanked him for letting Katie help her find Henry. BJ wanted Katie to play hooky from work with him, but Katie insisted that work was about the only thing that would help keep her mind off of how upset she was about her breakup with Mike, so they left to take BJ's limo to WOAK. On the road, however, Katie realized they were going in the wrong direction, and BJ told her he'd decided that instead of going to the office, they should go to his private island in the Caribbean.
Paul called Meg and had her meet him out by the shops of Oakdale, where he told her she would be happy to know that Jennifer would be leaving the country soon, to get away from the reminders in Oakdale, and now Meg and Dusty could be completely happy together. Meg wondered whether she and Paul might meet in Hell some day, then she left to go to work at the hospital.
Emily stopped by the hospital and ran into her mother. Susan asked whether Emily and Paul had set a date for the wedding, and she told Emily that she really wants to be there to see her get married; she said that she hopes that years from now, Emily and Paul will be able to say "I told you so" to Susan and the others who have doubted their relationship. Emily then went back to Paul, who appeared upset that she had invited her mother to the wedding. Paul left, and when he returned, Emily asked him if he was having second thoughts, but Paul said he just wanted to formalize things. He got down on one knee and pulled out an engagement ring for Emily, who tearfully accepted it.
At Iris's house, Will had decorated the whole place for Christmas, which awed Gwen when she returned with Billy from spending the night at Carly and Jack's house. Gwen wondered whether they'd be okay at Iris's house, but Will assured her that Iris wouldn't be able to come back to hurt them right now. Will and Gwen discussed the fact that they now appear to be living together in Iris's house, then Gwen said she needed to take Billy to the hospital to see his pediatrician for a checkup, and they left.
At Oakdale's Memorial Hospital, Jennifer worked on decorating the Christmas tree in the children's ward. Gwen and Will showed up with Billy, and Will didn't want to speak to Jennifer, because she didn't believe him when he said he didn't have anything to do with poisoning Iris. After Jennifer apologized and Gwen reminded Will that Jennifer basically saved Billy's life earlier by stopping by Iris's house when Billy was left alone, Will forgave her, and he and Jennifer hugged. Will and Gwen left, and Jennifer began to cry. Meg saw her and apologized for disturbing her, but Jennifer said it was okay, that she can't believe how torn up she still is about losing her son and how she wished she could just accept the fact that he's dead. Faced with Jennifer's obviously great distress, Meg's guilt overwhelmed her, and she began to hyperventilate. Jennifer asked Meg what was wrong, and Meg told Jennifer that she couldn't do this anymore.
Back at Iris's house, Gwen told Will she never really had much of a Christmas with Iris, and Will told her that things would be different now. After he lifted Gwen up to put the star on the tree, he told her to make a wish, but she said she didn't need to. They kissed, and Will pulled back, telling Gwen that although he loves her very much, he doesn't want her to do anything she'll regret. She said she could never regret loving Will, and Will then told her he's a virgin. Gwen said she essentially is, too, because despite the drunken night that she had sex with Casey, she had never made love before. They kissed again and sank down onto the floor together.