This episode opens with the final scene from last season. Luke is assuring Lorelai that he will not allow Rory to quit Yale. Lorelai looks up with a new appreciation for the man she loves. She asks Luke to marry her and with no hesitation he says yes. She is a little surprised by his immediate response and tells him he can think about it if he wants but Luke needs no further contemplation. They are a little unsure of what to do to celebrate this auspicious occasion but decide to toast the event. With no alcohol to be found in the diner, Lorelai has an idea. She grabs Luke's hand and starts to leave but Luke stops her. She is worried that he has changed his mind but he is concerned about celebrating when Rory's life is in such turmoil. Lorelai tells him that she just wants to be happy and they run to Doose's Market. Although the store closed, Taylor is on the square closing down the bike race. He sees Luke and Lorelai looking into the store and goes over to tell them that the market is closed. When he finds out their big news, he allows them in. Searching high and low, they find nothing but a $6 bottle of champagne. Taylor remembers that he has a case of Zima in the back and Lorelai excitedly asks him to get it. Luke, of course, is less than impressed with this option and suggests they go to Woodbridge but Lorelai refuses to delay their celebration. She runs out to the gazebo where they toast their engagement and seal it with a kiss.
Later in Luke's apartment, Lorelai is basking in the glow of their lovemaking but Luke looks a little pensive. Thinking back to his "What about the kids?" outburst, he tells Lorelai that they didn't have to have kids if she didn't want to. They could have one, or more or none at all. Lorelai is half asleep and responds with little understanding of what he has said. Luke rambles a bit more about how he purchased the Twickum house and then opted out of the purchase all the while Lorelai responds sleepily. Luke then asks her for confirmation that their engagement is really happening. Lorelai tells him that yes it is indeed happening and Luke lies down satisfied. Lorelai suddenly realizes what Luke was saying and responds…
Lorelai: You bought a house without telling me?
Lorelai: A house? I mean, a house is huge!
Luke: Yeah, I know, that's why I told you.
Lorelai: A house full of kids?
Luke: No, a plant, don't forget the plant.
Lorelai: Please don't do that, okay? Or, any other address or life changing decisions? Please include me in!
Luke: I will. I am. I'm sorry. I won't. [Pause.] I will.
Lorelai: (lies down again) Kids would be good.
The next morning Luke cheerfully serves his customers when Babette and Patty rush into the diner and give him a big hug. They are thrilled about the news and begin grilling him for details of the proposal. Luke seems a bit embarrassed to admit that it was Lorelai who proposed. When he goes back to work, Patty and Babette just shake their heads, disappointed that Luke and Lorelai took the modern approach.
As Lorelai looks at the Twickum house again, Richard calls to talk about Rory's upcoming court case. He tells her that his lawyer is meeting with Rory tomorrow and wonders if she will be there. To Richard's amazement, Lorelai shows absolutely no interest in the process.
The next morning, Emily charges into the Rory's bedroom in the pool house and flings the drapes open. Emily questions Rory as to why a young woman is still in bed at 8:30 in the morning. She has fabric and wallpaper samples for Rory to choose. Rory gets up sleepily and goes to get her coffee. She asks Emily how her mom reacted to her moving into the pool house. Of course, Emily dismisses Lorelai's disappointment and anger referring to her mother's penchant for histrionics as a typical overreaction. Later in Richard's office, Richard and Charlie Davenport reminisce as Rory listens. They finally begin to discuss the case and Rory finds out what is to come.
In the diner, Luke is struggling with a broken cash register when Kirk comes in with a case of diamond rings. Once Luke establishes that the rings are real diamonds and obtained legally, he takes a look at them. He finds one that is perfect for Lorelai. Kirk consoles Luke about 'losing his moment' when Lorelai proposed to him. He tells Luke that he has been avoiding Lulu for days so he it doesn't happen to him. Luke reassures Kirk that he will have his moment.
In New Haven, Logan is taking Rory to a surprise Felon's Party. When they enter the bar, all their friends are there in prison stripes singing For She's a Jolly Good Felon. Rory tries to convince Logan that she is going to enjoy lazing around. Logan, Colin and Finn are having a 'loser-off' to see who the biggest sloth is. Rory tells them that she is going to give them a run for their money but Logan gives her a month before she returns to school.
Luke is sitting in Lorelai's living room, flipping through a magazine. Luke is getting impatient but Lorelai is solving a fashion crisis. There is a knock at the door and Luke gets up to answer it. Paris storms in, frantic to speak to Lorelai. When she comes down, Paris tells her that Rory has quit school. She blames Logan and tells Lorelai they have to force Rory back to school. Paris tells her that she needs Rory to challenge her, that if Rory isn't around she will get lazy and become her mother. She worries that Rory is her only friend. Lorelai tells her that she doesn't need anyone to keep her motivated and that if Paris ever needs to talk she can just call her. Paris seems somewhat mollified as she leaves. Luke is amazed that Lorelai gave Paris her cell phone number. He asks Lorelai what she is going to do about getting Rory back to school. Lorelai tells him that Rory has to figure things out for herself, that she is on a course of tough love.
The next day, Emily knocks on Lorelai's front door. She is surprised to see Michel answer the door. She wanted Lorelai to get Rory something to wear for court but nothing has been done. She rants for a while and leaves nasty notes all over the house.
In court, Rory faces a very tough judge who rejects the plea agreement for twelve hours of community service and assigns three hundred hours instead. She explains that she has very little patience for rich, privileged kids breaking the law. Richard protests loudly and Rory begs him to sit down. The judge tells him she is quite willing to send the case to trial. Rory assures the judge that she doesn't want to change her plea and will do the community service. Richard storms out of the courtroom promising Charlie that he is going to sue him.
Lorelai arrives home to see Emily's notes stuck up all over the house. She rips them off and throws them to the ground without reading them. She turns on the answering machine to hear an angry message from Emily. She goes into Rory's room and begins throwing her things into a basket. We see her next charging into Richard and Emily's bedroom and dropping Rory's things on the floor. The Richard and Emily are startled by the intrusion.
Richard: Lorelai, why don't you sit and calm down?
Lorelai: I am calm. I'm fine. You guys must be pretty jazzed, though, huh? I mean, you finally did it. You finally got a shot at getting the daughter you've always wanted.
Richard:I'm too tired to have this conversation.
Lorelai: Rory. Here, right under your roof. Excellent.
Emily: You're being ridiculous.
Lorelai: Now you get your do-over. A new and improved Lorelai. Congrats. Very well played.
Richard:Lorelai, listen to me. I know that you think some sort of con has been perpetrated on you.
Lorelai: Hey, it's only a paper moon, Dad.
Richard:The fact of the matter is, your mother and I were just trying to do the right thing. We're all striving for the same goal. We want Rory happy and healthy. Now, she's taken a bit of a stumble. But we can get her back on the right track. All of us…together. We're going to need your input and your involvement to achieve that.
Lorelai: My involvement ends here, with the laundry basket.
At home, Lorelai sits in Rory's room and weeps. Luke comes into the house and calls out to her. He tells her the full moon is out and the moment is here. Lorelai composes herself and goes out to see her fiancé.