Casey determines that the cause of death for the four unfortunate corpses was heart failure, brought on by extreme mental stress.  She leaves to get some books on the subject.  While gone, Tugs taps the crystal and suddenly, the wires in the heads of the four corpses spring to life.  Like animals, they attack Philip, Ariadne, Lex, and Tugs, eventually boring into each of them.  Casey returns to find that the crystal is glowing brightly and that her four friends have been pulled into the pods in place of the discarded corpses.  They are all in suspended animation.

 

Inside the dream state, the four discover an environment that resembles a circus carnival filled with performers.  One of them, the apparent leader, at first appears as a clown, but transforms into a gray jester after looking at Philipa.  The performers quickly become violent and attack the four of them, pulling Lex up to a guillotine.  Just as they are about to chop off her head, however, two Humans named Geordi and Hazel, the same living Humans from the pods, appear, demanding that the performers stop.  Lex is spared and after some torment, the Gray Jester sends Tugs out of the environment with a message for the outside:  If they attempt to remove the Phoenix Fighters or survivors, or if they try to shut down the system, he will kill them.

 

Geordi and Hazel explain that they were students under Ruth Massie and that they build the device to wait out the end of the Ebene.  The Gray Jester, who has taken on many forms, is the manifestation of their fears, fully realized.  He has taken over the dream, turning it into a nightmare.  Not only does he control their lives, scaring them to death with the guillotine, but he can read their minds as well.  To prove his control over the situation, he tortures Lex with darkness and isolation.  Meanwhile, outside in the kitchen, Casey and Tugs work furiously to find a solution.  Quinn helps by going into Lex's mind to try and negotiate with the Gray Jester, but he wants nothing more than to exist, which he cannot do without living brains to feed the crystal. 

 

He becomes fascinated with Casey, however, who everyone keeps thinking about in the hopes of rescue.  Therefore, he declares that the only way he'll let the hostages go is in exchange for her as his prisoner.  After Quinn leaves, the Gray Jester turns his attentions to torturing Ariadne with fire.  Outside, Tugs attempts to shut down the system.  Unfortunately, the Gray Jester becomes aware of this plot and retaliates by dragging Geordi up to the guillotine.  He pulls the switch which causes a massive heart attack, killing Geordi by scaring him to death.  Helpless, Tugs restores the system.

 

The Gray Jester turns his attention to Philip, haunting him with a vision of Ganon who tries to abuse Ariadne.  Philip manages to stop it, much to the Gray Jester's disappointment.  At that moment, however, Casey appears in the dreamscape, offering to make good on a trade, herself for the others.  The Gray Jester eagerly accepts the offer and it is only after all the others are gone that he learns he's been had.  Casey is actually a hologram, created by Tugs.  The others are all safe in the kitchen.  Philip admits that the Gray Jester came from his own mind; it was his imaginary friend as a child.