In the big plot, the search for a reason for Agent Cooper to stay in Twin Peaks involves being deputized and getting an undercover sting going, convincing Norma’s new stepdad (and Hank’s prison pal) to set up a drug buy with Jean and Hank and all the general baddies at a property Agent Cooper was looking to buy. Since the plan hinges on Denise both dressing and acting masculine and the grand total of their backup is Deputy Hawk, it goes perfectly. By which I mean Agent Cooper ends up trading himself as a hostage for the stepdad and Denise. Jean, realizing the longer they wait, the more cops will show up, debates the merits of releasing Cooper and trying to run vs. killing Cooper and committing death by cop. He is definitely leaning towards the latter option. Denise comes back, dressed as a waitress delivering food so they don’t recognize him (I guess it’s male pronouns? Okay. We do know he considers himself a straight man.) and smuggling Cooper a gun, which he uses to take out Jean.
But now this plot is done and they need a NEW reason to keep Agent Cooper in Twin Peaks and probably also make him an FBI agent again. So his former partner, Windom Earle, who went crazy a while back, starts innocently sending Cooper chess moves, so they can play in the mail. (This was a thing before the internet, among a very select portion of the population.) Then he ups the ante by figuring out how to kill random transients with convenient names and stage their bodies in the police station (setting a fire to distract everyone) with every time he takes one of Cooper’s pieces. To their luck, Pete is apparently a chess expert and agrees to lend his expertise.
At home, Josie is still playing maid to Catherine. The Sheriff tries to ask her why, but since he won’t listen to her answers (he insists on making out with her instead and it is really disturbing) we don’t know why. Even while evidence mounts that Josie was the one who shot Agent Cooper (WHY?), Catherine invites Josie’s former pimp over to the house and makes Josie serve them dinner while they discuss selling her. It’s a lot like that Game of Thrones scene wherein Reek proves his loyalty by not slitting his master’s throat, except we have no idea why Josie’s not poisoning both their dinners because she does not seem to have Stockholm Syndrome.
Dick is still trying to convince Deputy Droopy that his charity case, Little Nicky, is the literal devil, so they break into the local neighborhood orphanage during lunch break to steal his files. (I’m thinking the Adam Sandler movie was an homage to this.) Of course they are caught by prospective parents who assume this is all normal, and Dick tries to cover for them, giving Deputy Droopy the cover name of Woody, meaning he’s named them both euphemisms for penis and I snort-laugh. See, Rest of the Town? This is how you do euphemisms! Lucy and the Doctor sit them down and tell them the actual tragic backstory of Little Nicky (he gives Tyrion a run for his money) and they drop it.
Norma decides that since Nadine’s constantly hitting on teenage boys (Bobby’s friend Mike/Snake, in particular) and she’s just not feeling it with Hank, she and Garage Ed should finally get back together. So she gives him a long, impassioned speech, then says “your turn” and he just says “later” because they’re not exactly exchanging vows or anything. Hank catches on quicker than you might expect anyone in this town to catch on to anything, and decides to beat up Garage Ed. But since he’s the most incompetent goon ever to goon, he gets beaten up by Nadine instead. Later, when Garage Ed and Norma are enjoying some post-coital conversation, Nadine comes home and pops right into bed next to them to talk about her day. On her way out she lets them know she’s cottoned on to their relationship (sort of) but it’s okay because now she can continue sexually harassing a teenage boy without feeling guilty!
Ben has decided to completely lose his mind, in the form of living a constant Civil War reenactment, except he wants the South to win. Everyone acts like this is only uncomfortable because it’s split from reality and not because of the thousand other reasons it’s uncomfortable when someone casually mentions they wish slavery were still a thing. (Episode 15 is called “Slaves and Masters,” so clearly the writers were aware.) Dr. Jacoby finally decides the best thing is to stage a play wherein Ben can act out the North surrendering to him as General Lee, and this does seem to break the delusion. Great. Now they’re never going to tell Nadine the truth.
Emo-Boy has decided to save the Merry Widowmaker by taking her away from her home. This is a little different from her plan of having him kill her husband (who probably does not hit her) so she can run off with her “brother.” Since altering her plan so she can run off with an Emo-Boy is not what she wants, she instead frames him for her husband’s murder. Despite all the practice he’s had being framed for things, he panics and runs off. When Donna suggests they get the advice of an adult, he panics and runs back, convinced the Merry Widowmaker really does love him. She doesn’t, but she’s not entirely convinced when her “brother” shows up and demands that they kill him. Then Donna runs in and she’s definitely not convinced they should kill two people, so instead she shoots her “brother.” Hurray! Someone we don’t care about killed someone else we don’t care about! We’ll never visit this storyline again!
Leo finally “wakes up” (not how brain damage works, but likely also not what’s actually happening so it’s okay) and tries to kill Shelly. She manages to get him out of the house and he runs off to join Windom Earle. Which I think means that Leo is still brain damaged, but those spirits in the woods don’t need brains, they just need bodies. So one of them got into Leo’s body and is controlling it. That’s what I think. Anyway, now Windom Earle has Leo fitted with a shock collar and is training him in the finer arts of serial killing, starting with ransom letters to be sent to Audrey, Donna and Shelly.