This episode introduces yet another character, Danielle Moonstar (Mirage from the comics, as I'm sure a lot of fans know). The episode acts as a tribute to classic horror films, and the "worst nightmares" are impressive. Not very scary, but the animation looks great. One can really notice how good the animation has gotten on this show, compared to the first season.
The story is confusing, if you don't realize that most of this episode is a dream sequence. And it's not easy to notice this, at least not the first time you'll watch the episode. So, in the beginning, Kitty crashes with her bike in the canyons, and everything that follows is only a dream (or a nightmare, really). A smart move was to alternate the dream sequences with stuff that actually happens, like Wolverine's and Sam's (Cannonball) race through the canyons. The scenery is superb, this episode being one of the few that don't take place in the Bayville area. A change of scenery is always nice, and animated like this it's really superb.
Towards the end, everything is explained, how much was real and how much was only a dream. Sure, some questions are left unanswered, but it's all good.
An enjoyable episode, but a bit confusing at times.