Buttons the Bear enters into a dangerous affair with the wife of an unstable old military colonel.
Cuddles is subjected to a government mind control experiment.
The puppets work at a Shakespeare Festival, with very bad results.
Dan encourages Cuddles to be more creative in his artistic endeavours but is surprised when he sees the unusual source for Cuddles' newest creations. When Cuddles is believed to be dead shortly thereafter from an apparent suicide, interest in this ' work ' skyrockets and Bill and Rocko quickly move to advantage of this atmosphere.
Bill must deal with Corrections Canada's new social worker intern at their house. Meanwhile, Dan, Cuddles, and Buttons fight for their new neighbour's affections.