Hank and Peggy sit at the kitchen table reviewing their Christmas party lists. Hank tells Peggy that Bill will arrive without a date--prompting Peggy to fear that Bill will once again spend the entire party crying over Lenore. Later that day, as Hank and his friends drink beer in the common alley, Bill begins to sob. He tells the others that although he loves Christmas, the holiday marks the anniversary of his breakup with Lenore seven years earlier. Hank follows Bill home, where he finds presents wrapped with fading paper. Bill admits that he has been saving the gifts for Lenore's return. That night, Bill joins the Hill family for dinner. He raises the subject of breakups, causing Luanne, Bobby and even Peggy to experience unpleasant memories. The next morning Bobby and Peggy ask Hank why Bill is allowed to ruin their dinners. Hank explains that some twenty years ago, Bill's blocking allowed him to set Arlen High School's single season rushing record. And for that, Hank will be forever grateful. The next day, Bill arrives at the Hill home in the company of his new pet iguana, which he has named Lenore. Bill places a half-dead roach on the dinner table and watches as Lenore gobbles up her meal. That night, Peggy tells Hank that Bill is no longer welcome at the dinner table. A few days before Christmas, Hank tells his friend that he and his family are dining by themselves. Miserable, Bill borrows Hank's ladder, climbs onto his own rooftop, and then jumps. The drop, however, is only about eight feet, and he survives.
Hank fears that Bill may find a more effective way of committing suicide. He devises a schedule so that Bill will be under constant watch. He, Dale and Boomhauer take turns monitoring Bill's every move in case of trouble. Bill attempts halfheartedly to do himself in on several more occasions, but he fails. The schedule interferes with Hank's much-needed rest. Hank asks Peggy if she can find a date for Bill. Peggy invites Mrs. Tobias to join Bill and the family for dinner. But Mrs. Tobias quickly concludes that Bill has gone over the edge. Hank eventually loses his patience. He enters Bill's home and begins destroying the old gifts meant for Lenore. Bill is numbed by the experience, though he assures Hank he is perfectly fine. Hank returns home, where he finds Lenore the iguana perched atop the refrigerator. Hank carries the creature into Bill's backyard, where he encounters a woman hanging clothes on a line. When the woman turns around, Hank realizes, to his horror, that it is actually Bill in a dress.
Speaking in a falsetto voice, Bill assures Hank that he is actually Lenore. Hank turns and walks away, warning Bill not to show up for the party. But on Christmas Eve, Bill arrives at the affair wearing a dress, hat and necklace. Hank gasps at the sight. He then instructs Bill to leave the house at once. But Bill remains, insisting that Lenore loves a party. Just then the real Lenore telephones the Hill residence. But before Peggy has a chance to hand Bill the phone, Lenore hangs up. Bill breaks down, sobbing. The party-goers turn vicious and begin insulting Bill. Suddenly, Hank emerges from the bedroom wearing a dress. Bill runs outside, and Hank follows. Pretending to be Lenore, Hank tells Bill he no longer loves him. Bill gets angry and tells "Lenore" to get out of his life. With that, Hank removes the dress. A few moments pass, and Bill removes his dress as well. He returns to his senses, telling Hank he hit "rock bottom" for a while. With that, Hank wishes Bill a "Merry Christmas."