This great episode is easily one of the very best of the entire season.
Hudson Leick works excellently with Kevin Sorbo, and all of their scenes together are great. Although she was great as Callisto from the off (in 'Xena: Warrior'' first season episode named after her), by this point she has got the part off to perfection, as she repeatedly taunts Hercules about the death of his wife and children. She is particularly cruel as she promises Herc that, if she goes back to the Underworld, how she will make his family suffer.
The only thing that marks this episode down a couple of notches in my opinion is the scenes of Hercules' drugged family and friends (which include Iolaus, Alcmene, Jason, Iphicles and Falafel. I wonder why Salmoneus wasn't there). The plot device of Callisto drugging them is great, but I found there various drug-induced hallucinations and nightmares dragged out, almost used to pad out the story. The only good moment to come from these scenes is as Iolaus encounters himself as a wrinkled, lumbering old man; but beyond that, it's all pretty much padding.
But that's my only niggle with this otherwise great episode. One of my gripes with this season is that – as much as I love the show – it offers up a lot of rather silly, average-at-best stories. This one is one of the few that is really outstanding, and a great example of the series.