The episode starts out with Xena having nightmares about Callisto and Ares; her guilt and the part she played in Callisto's death is taking it's toll. In dreams within dreams, Xena sees her mother, Ares, and Gabrielle all blaming her for Callisto's death. Gabrielle even seems to turn on Xena, saying that maybe there was some good to mined there, but so what... and then she points out that if Hercules had treated Xena like Xena treated Callisto, then Xena would be dead. Xena is dreaming this, of course, but to her it's a very real and upsetting dream.
Xena and Gabrielle are tracking Theodorus and his men. Joxer is following them as well, and gets himself caught. Xena's war cry is enough to scare the men off, leaving Joxer dangling from a rope. Xena cuts him down and he falls on his face. Then they go to sleep.
There is a thin line between dreams and the Underworld... and the dead can play upon deep guilt. Callisto and Ares have been plotting, invading Xena's dreams, and now she's in a dreamscaped Tartarus, but really with Callisto and Ares. Xena finally admits her guilt and actions in Callisto's death, and she's whirled into a rock. She is now in Callisto's body.
At first it's difficult to determine if this is a dream, but it turns into reality quickly. Gabrielle is now with Callisto, only Callisto is in Xena's body. Argo knows something is amiss, and will have nothing to do with Callisto/Xena. Then Callisto/Xena tells Gabrielle that her guilt about Callisto's death will not allow her to kill her a second time; Gabrielle will have to do it, and should have done it the first time. So Callisto/Xena teaches Gabrielle how to kill with the staff, taunting her until Gabrielle actually punches Callisto/Xena in the stomach. Callisto/Xena then ties a knife to the end of Gabrielle's staff, and tells Gabrielle to go on ahead, she's going to tend to Argo.
Xena/Callisto convinces Hades that Ares has been meddling, and he gives her a day to set things straight. She goes above, and the first thing she finds is Argo, who has been sliced with a sword by Callisto/Xena. But the horse is not dead, and Xena/Callisto saves her. Joxer shows up here, also, and tries to protect the horse until he is convinced that Xena/Callisto is really Xena.
Xena/Callisto catches up to Callisto/Xena, and with no Gabrielle in sight Xena/Callisto expresses major concern. Callisto/Xena taunts her, saying she's already killed her. Then they fight, and finally Xena/Callisto ends up on top, but suddenly Gabrielle is at her back, with her pointed staff at Xena/Callisto's neck. But Xena/Callisto is able to convince Gabrielle that she is really Xena trapped in Callisto's body; but Callisto/Xena gets away. Gabrielle is upset that she almost killed Xena/Callisto and takes the knife off of her staff.
Callisto/Xena finds her army, and they throw down their weapons. Theodorus says that as long as they do nothing to upset Xena, she won't harm them because of some code she lives by now. But Callisto/Xena goes to Theodorus and slits his throat. She then asks the others if they will follow "Xena" and of course they say yes. She tells them to go to Amphipolis and kidnap the entire town,and bring them back to the cave.
Xena/Callisto, Gabrielle and Joxer go to save them; Xena/Callisto knows that Callisto/Xena wants to burn the people. So she has Gabrielle throw oil at the army, and they have to put out the torches. Xena/Callisto and Callisto/Xena then have another fight, but for some reason Xena/Callisto starts to fade, running low on time. Before she fades, though, she throws a dart at Callisto/Xena, putting her to sleep.
So Callisto/Xena and Xena/Callisto end up in the dreamworld area of Tartarus again. Xena/Callisto plays on Callisto/Xena's guilt, even though she says she has none. After all, the dead can hear your thoughts. Callisto's mother appears, and then soon she is surrounded by all of her victims. The Callisto/Xena body smashes into the same rock that Xena did before.
Cut to the cave where the townspeople and Gabrielle are watching where Xena's body had fallen. Callisto's body returns, apparently with Xena still in it. And this is where the show ends, with Xena saying she's trapped in this body, and if Gabrielle can't live with that she certainly understands.