The episode opens with a flashback to the Russian front during World War II, where "Dr Ivchenko" (Ralph Brown) is reading Doctor Faustus by the light of the falling bombs. In English, of course, so that we the audience at home won't miss this vital clue. Ivchenko's real name is revealed as Dr Fennhoff, which is of course the real name of the mind-manipulating Captain America villain Faustus. So, ten points to House Me for guessing his identity back when he first appeared! Faustus (let's cut to the chase and call him that, it's much more exciting) is shown using his hypnotism to send a soldier into a nostalgic reverie while the doctors cut off his leg.
In the present day, Peggy (Hayley Atwell) is interrogated by Sousa (Ever Gjokaj), Thompson (Chad Michael Murray) and Dooley, who pull the old "boring cop/smug cop/third cop" routine. But Peggy is unflappable, and holds to her conviction that interrogating her is a waste of time when Dottie is at large.
And Dottie is at large and fabulous. No longer faking it as an Iowa farm girl, Dottie goes shopping for a baby carriage boasting a slick new black-and-white look that's the sartorial equal and opposite of Peggy's red, white and blue in episode one. These ladies need to have a walk-off.
Jarvis (James D'Arcy) arrives at the SSR with a confession from Howard Stark that exonerates Peggy. He says he'll provide the signed page in exchange for Peggy's freedom. Dooley says she can leave when Stark walks in --- and PS she's fired, obviously.
Left waiting in the meeting room, Peggy is slow to realize that the confession is a forgery, but quick to spot Faustus relaying a message in Morse code to an unseen partner by tapping on the windowsill. Knowing that an attack is coming in the next ninety minutes, Peggy tosses out the fake confession and gives a real one, revealing everything that's happened so far, up to and including the existence of a vial of Steve Rogers' blood. And in case you missed the underlying message of the last six episodes, Peggy makes it plain; the reason she was able to get away with so much is that none of them believed a woman was capable of anything. Unfortunately it's 1940 and no-one has invented video on demand, so the fellas can't watch the first six episodes of the show they're in.
Dooley isn't buying that Faustus is a villain, because Dooley's simple man brain is already under Faustus's spell. Accordingly, he locks Peggy and Jarvis in an interrogation room and breaks the key in the lock, and takes Faustus to the lab to pick out a prize for being such a good boy.
Sousa and Thompson take a couple of men across the street to look for Faustus's partner. Sousa finds Dottie and gets his ass kicked, and Dottie makes a spectacular escape by controlled descent down a stairwell. Dottie reunites with Faustus and they drive off with 'Item 17' from the fall/winter Stark collection.
And Peggy misses all the action because she and Jarvis are handcuffed to a table.
Thankfully Thompson finds them in time to bring them out to witness Dooley's big moment. See, poor hypnotized Dooley, living out a fantasy of boring 1940s domestic bliss, has been tricked into wearing a prototype Stark armor that's heating up and about to explode. In a display of superb timing, Dooley throws himself out of a window at just the right moment to ensure the explosion doesn't kill anyone at SSR or anyone on the street below.
Okay then. Bye Dooley. Bye. Don't let the... well, never mind.
Peggy blames herself for Dooley's death; Jarvis persuades her to blame Howard instead, which is an excellent coping mechanism. This reminds Peggy about Steve's blood, but it turns out Faustus and Dottie (what a great name for a supervillain duo; "Faustus and Dottie") did not come for the blood, they came for... Item 17.
And in a movie theater somewhere across town, Dottie abandons a baby carriage containing this Item 17, a canister that emits a gas that forces everyone in the theater to kill each other.
Oh, Dottie, you and your hijinx. (Canned laughter.)