Stan and Kyle are being held in the bowels of the Pentagon until they tell the government how they got into Imaginationland. Meanwhile, Cartman is on a deranged quest: Find Kyle and have him make good on their bet.
Butters wakes up to find his mother and father at his bedside, having cooked him breakfast. Butters explains about his weird dream of Imaginationland only to find out that he was only hallucinating with his eyes closed. He wakes up in Imaginationland having passed out and wet himself, and becomes sad that his parents are never gentle to him. The evil side of Imaginationland breaks through the barrier and charges at the residents of the good side. The terrorists proclaim "Allah!" but are killed in seconds by one of the creatures. The Mayor of Imaginationland is then badly injured by Alien and Butters is pursued by Predator and Stormtroopers.
At the Pentagon, the boys explain they don't know how they got to Imaginationland, and that "some guy just showed up in a big balloon and took us into Imaginationland". The boys continue to explain they don't know, and the military leader's advisor comments it was probably through the Chinese portal to Imaginationland. He accidentally reveals the United States has one too, and not understanding the sarcasm of his boss he explains it was used against the Russians in the Cold War.
Cartman then narrates his dream, and that as Kyle is about to suck his balls, he turns toward Cartman, only to reveal that his lips sewn shut. Cartman then wakes up on a coach heading to Washington.
Back at the Pentagon, Stan and Kyle are shown the portal to Imaginationland, called "Project Imagination Doorway". The scientists ask the boys how they got in Imaginationland again, and the boys explain they just went on a balloon with the Mayor who sung a song and they arrived. They sing a few bars and one of the monitoring devices picks something up. The scientists then believe the song is what caused this, and get the boys to sing it which they reluctantly do with difficulty, since they need to do it in the exact way it was done before.
In Imaginationland, Butters asks the dying Mayor what they should do. He replies sarcastically that Butters should tap his shoes together three times. Snarf and the Lollipop King also ask the Mayor what to do. He tells them to head to Castle Sunshine which is through the Gumdrop Forest; and they must look out for evil characters.
The evil characters have set up a camp on Yum Yum Mountain and discuss who should be in charge by order of most evil. The characters can't decide and suddenly, some Woodland Critters turn up and tell the others they're all meant to be on the same side. They explain they can't waste time by arguing, for they need to find survivors and kill them, or as they decide, "Kill them, then rape their bodies so we can use their blood as lubricant". Jason Vorhees explains that "Man, I do not want to meet the kid who dreamt those things up!".
Cartman is at a phone booth in Washington, trying to get answers out of the Pentagon on the phone to where Kyle is. The secretary explains the information is classified, and then the adviser comes along and tells Cartman there is no such thing as Project Imagination Doorway which he then goes on to explain about.
After finally figuring out how the song goes the portal opens up.
Butters, Snarf and the Lollipop King are passing through the Gumdrop Forest when they spot the evil imaginary characters torturing Strawberry Shortcake. The woodland critters appear to have took charge and after deciding how to kill Strawberry Shortcake they discover nobody has AIDS (to urinate in her empty eye socket) and decide to go looking for someone with AIDS in the forest. Butters, Snarf and the Lollipop King run for their lives.
At the Pentagon, a band of soldiers (and Kurt Russel because he appeared in a film similar to the situation) are prepared to go into the portal. Cartman suddenly breaks through into the room and Kyle is forced to go with him to fill his side of the contract.
Cartman and Kyle are then in a room together, with Kyle preparing to suck Cartman's balls. Kyle tries to explain the situation to Cartman as being more important, but Cartman cuts him off mid sentence by yawning loudly saying he doesn't care about anything but getting his balls sucked. Cartman then dresses as royalty and Kyle nags him to just get on with it.
The soldiers enter the portal, and upon arriving in Imaginationland they meet the woodland critters. Remembering woodland critters from Cartman's story a few years ago, Stan warns the scientists to get the soldiers out. It is too late, however, for the woodland critters are already raping them.
Cartman continues to torment Kyle, but they are disrupted when a soldier enters and tells them everyone must proceed to the main room. Cartman angrily follows, outraged at being disrupted again.
Butters, Snarf and the Lollipop King sight Castle Sunshine and hurry towards it. At the gates to the castle, a guard demands to know which imaginary characters they are. Snarf and the Lollipop King enter but Butters is not a character and is believed to have been with the terrorists because he arrived at the same time and is taken away by a guard.
Back at the Pentagon, a strange creature comes through - Manbearpig. He attacks the people inside and strangles Kyle. The scientists try to suck Manbearpig back in, by doing so they also send Stan through as well as Manbearpig.
In Sunshine Castle, Butters is took to see the Council of Nine. The council consists of Jesus, Aslan, Gandalf the Grey, Popeye, Luke Skywalker, Wonder Woman, Glinda the Good Witch, Zeus and Morpheus. Zeus explains they should leave, but Morpheus believes it is a trap. Glinda tells them they should go to the Temple of Andarra, but Jesus explains they must fight, which Luke Skywalker agrees with. Butters is lead in and sent up to Aslan.
Kyle appears to have died from Manbearpig's attack. After many attempts to revive him, the scientists finally give up. Despite wishing so many times for Kyle to die, Cartman is both angry and upset by Kyle's 'death' since it means he won't be able to suck his balls. Unwilling to live with this, a desperate Cartman manages to revive him by using CPR.
In Sunshine Castle, the Council of Nine believe Butters to be the key to the situation. Butters is reluctant to be the key, but Aslan tells him to believe in himself and he will be alright.
The military prepare to launch a nuclear weapon through the portal to nuke the imagination.
Cartman shows up at Kyle's bedside, preparing for Kyle to suck his balls.
This episode, along with the other two parts of the trilogy, won a 2008 Emmy Award in the category of "Outstanding Animated Program (for programming one hour or more)". This is the first and only time the show has been nominated for this particular award category, as well as the show's third overall Emmy Award.