Mr. Ernst is sleepwalking, and the ruckus he creates awakens Buddy, Melody, and Jake. The sleepy investigators converge in the lodge and find Mr. Ernst bouncing off the walls in a zombie-like trance. Cackling in his sleep, Mr. E rings up the cash register and throws wads of money into the air (and into Buddy's grateful hands). A concerned Mel rings the desk bell, waking up their bewildered boss. He wonders why Buddy has a fistful of dollars.
The next morning, Mr. Ernst calls a meeting at the picnic benches. He hands out cow bells to everyone, with the explicit order to ring the bells and awaken him if they catch him sleepwalking again. He wears a bell around his own neck for added protection.
He leaves the kids to their own, and Ted shows up with a box containing the coveted Smelt Trophy, named after the previous owner of the Bar None. The veteran staffers, Danny and Melody, are excited at its sight. After all, the trophy is given to the winning Capture the Flag team, and Ted, Danny, and Mel were last year's champions.
They tell the others that their form of Capture the Flag involves hiding your flag after dark, then finding and capturing the other team's flag before dawn. Besides the bragging rights and the trophy, the captain of the winning team earns the title "Senior Staff." This piques Brad's interest, but she's a little skeptical that winning this game really earns the coveted title.
While the kids discuss whether or not to play this year, Mr. E aimlessly wanders about the grounds with his arms outstretched. But much to Mr. E's dismay, the kids pay no notice to his apparent sleepwalking. Turns out he was testing the kids, and they receive a good rebuke for their inattentiveness. While he's there, Brad takes the opportunity to ask him about Ted's Senior Staff title. Turns out Mr. Smelt recommended Ted ...but Smelt did also mention something about winning a Capture the Flag game.
Now that the stakes have been legitimized, Brad is very interested in playing for the title. The teams form up: the veterans, Ted, Danny, and Melody, again comprise the Red Team. Brad heads up the Blue Team, whose roster is rounded out with Jake, Kyle, and Buddy.
Mel and Danny meet Ted at the dock. Ted shows them his design proposals for their flag. Danny and Mel are initially dismayed and disgusted at the brutal imagery, that of Timmy the Magic Shrimp in the clutches of the evil Lobster King. Turns out that Timmy is their beloved Saturday morning cartoon character. Ted tells them to never mind, it's an eagle clutching a lightning bolt. Besides, they need to concentrate on training. While tying a barbell to Mel's ankle, he explains that their regimen won't be quite as rigorous as Navy SEAL manual he read.
As Mel and Danny start wondering out loud if Ted is serious, they spot the Blue Team across the lake. Ted exclaims that they must be spying, but the Blues are all reclining in chaise lounges tanning their cheeks! Red Team strolls over for a visit, and they find Brad leading the Blues in index finger calisthenics. Ted scolds them for neither training nor taking the competition seriously. But Brad claims that they do have a plan -- a plan that insures that even if they lose, they win. Red Team is befuddled by this cryptic assertion.
As dusk approaches, they all meet Mr. Ernst around the flagpole as he lowers Old Glory. They ask Mr. Ernst if they can play Capture the Flag for the right to the Senior Staff title and the Smelt Trophy, but Mr. E is reluctant to let the kids stay up all night like that. He firmly nixes the idea and heads off without further discussion. Ted is all game though, and he challenges the Blue Team to play anyway. After they trade a few taunts, the challenge is firmly established. As Blue Team heads off to plan their strategy, Ted glares at their backs. Mel tries to tell him it's just a game, but to him it's much more than that.
Later (way later) that night, Red Team has hunkered down in their outpost. It's almost dawn, and they haven't done anything but lay ambush. Mel complains that this is the most boring game she's ever played. Ted, fully camouflaged and wearing a beret, tells them that he has a spy in the enemy camp, and that spy has informed him that the Blue flag is in the girls' bunkhouse, under Brad's pillow. He devises an overly elaborate commando raid that disgusts Melody into quitting for the night. She ignores Ted's screams of "Traitor!" and stomps off. A bemused Danny sets forth with Ted on the mission.
Meanwhile, Blue Team has their own inertial problems. The recon force (Buddy) has been unable to locate the Red flag. The only clue they have is Ted's hint that the Red flag will be in plain sight, but still unretrievable.
Suddenly, Kyle barges in with a prisoner Melody! Buddy starts a tape recorder while Jake explains how they will torture out information playing some of Uncle Ben's nose flute cassettes. But a fed up Melody preempts the interrogation by outright telling them where the stupid red flag is located: In the Lodge, above the fireplace, booby-trapped with alarms to wake up Mr. Ernst. Blue Team is momentarily deflated by the news, but a determined Brad isn't ready to quit.
Ted and Danny, both in streaky face paint, stealthily sneak up on the girls' bunkhouse. From outside, they can hear Brad insult Ted. They split up and assault the bunkhouse from separate entrances. But they end up only beating up on each other, as nobody is home except a bound and gagged Melody. The Brad they heard was a tape recording. They search under Brad's pillow and pull out a taunting note from Brad instead of the flag. Buddy the weasel, has betrayed Ted by turning double agent!
Blue Team has infiltrated the Lodge and, sure enough, the Red shrimp flag is hanging in plain sight. But the bells and minefield of mousetraps pose a formidable obstacle. Undaunted, Blue Team rigs Buddy in a rope harness. Jake and Kyle hoist him into the air, and Brad gives Buddy a push towards the wall. But the reality is far more difficult than the plan, and Buddy does a lot more flailing than retrieving. All the while, Blue Team is working as quietly as possible for fear of waking Mr. Ernst.
But Mr. Ernst doesn't need to be awakened. He sleepwalks into the Lodge, paralyzing Blue Team with fear. They sigh momentarily with relief as they notice Mr. E forgot to wear his cow bell. But Buddy panics. Still hanging above the mousetraps, he pulls own bell his out and drops it. The clang wakes Mr. Ernst, and he opens his eyes to the surreal sight before him. Thinking quickly, Jake tells Mr. E that he's still sleepwalking and this is all a dream. Mr. Ernst doesn't think so, but Jake points out the evidence (a shrimp on the wall, mousetraps all over the floor, your son is flying, etc.). Mr. E, more confused than ever, dazedly nods his assent, and lets Brad lead him back to bed. With their biggest obstacle removed, Brad, Jake, and Kyle exchange high fives, letting go of Buddy's rope dropping him into the mouse traps.
Back in the boys' bunkhouse, Red Team is frustrated. They don't have any idea where the Blue flag might be. All they have is the clue Brad gave them. Danny and Mel reason that if it's under their nose, it must be smelly. Then they both look at Ted. They yank off his jacket and, sure enough, the Blue flag is tucked into Ted's sleeve. But as Mel unfurls it, she realizes that they have still lost. They found the flag, but it won't ever see the flagpole. Devastated, she shows Ted the flag:
TED IS A DORK
For a second, Ted doesn't even understand the words, or the implications. But after his simple mind starts clicking, he becomes indignant. But then his will to win overcomes all. Mel and Danny cheer as they realize that victory is only yards away.
As Ted sprints for the flagpole, dawn has broken over the Bar None. But Brad and the Blue Team have the Red flag and are dashing for the pole themselves. The two teams converge at full speed and Ted and Brad collide heads. They both fall to the ground, passed out. As the stunned kids look on, Mr. Ernst greets them for the morning flag raising. Hastily, they cover Brad and Ted with the flags, telling Mr. E to be quiet as the two are sleeping. Fortunately, Mr. E is still befuddled and he buys the ruse, though he does wonder why Buddy is covered with mousetraps.
Later that day, both Ted and Brad have been examined by a doctor (negative on concussions), and they sport white bandages on their noggins. The other kids present the Smelt trophy to Ted and Brad. It is inscribed with victory to the purple team. Purple? Well, that's what you get when you mix red and blue, explains Danny. "And it's the color of your bruises," Jake adds.
And Ted and Brad have agreed that since it was a tie, Ted is still Senior Staff. Or maybe they haven't agreed on that!
The episode concludes with the kids spotting Mr. E heading into the windmill, his arms outstretched like he's sleep walking. Thing is, Mr. E is merely inspecting his scraped knuckles. The gang runs at Mr. E, ringing their bells and causing all sorts of commotion. Mr. Ernst, startled at the oncoming horde backs up and performs a patented slapstick fall into the well, thus bringing an end to the Bar None adventures.