Cornered by a trio of goblins, Megan and the rest scatter and hide. However, the goblins easily locate each hiding spot and capture the ponies, girl and dragon hiding there. As Wind Whistler notes—
Paradise: What?
Wind Whistler: They knew where they were.
However, Wind Whistler and Paradise remain undetected in their own nook. In between bickering with each other over whose catch will impress their mother more, the goblins gloat over having caught "all" the intruders, stating that, if there were any more, they'd have heard their thoughts. Wind Whistler deduces that the goblins are using the power of the horseshoe of telepathy to tell where the hiding ponies were, and the previously recovered ones, which she and Paradise are wearing around their necks, must be shielding them from the third one's power.
In the goblins' home, the brothers three return to their parents with their catch. The mother has the prisoners thrown into a cage, and announces that they will be kept as slaves to pick up the slack that the brothers' constant bickering creates, before breaking down in tears over her sons' animosity. Megan explains that the horseshoe's telepathic powers are letting the brothers hear each other's thoughts and setting off their fights, and offers to take the shoe away to fix this. The mother goblin refuses, stating that goblins never give things away, and the two parents leave to count their treasures.
Back at Paradise Estate, the Moochick is taking care of Mimic. One of the ponies asks why he can't use his magic to bring her back to health, and he realizes that that might be an option — but he can't get to his home in time to do so. Whizzer offers to take him, since she's fast enough to get there in time.
Back in goblin town, Wind Whistler and Paradise sneak into the goblin lair, free the others and flee with the horseshoe. The mother goblin orders her sons to chase them, but is shocked to see them pause to make up and apologize first. Realizing that they've got their family spirit back, she calls off the hunt and lets the heroes escape.
At the Mushromp, the Moochick is hard at work at his cauldron. However, despite his best efforts, he can't do anything to save Mimic — the magic is simply beyond him. It must be the horseshoes or nothing.
After fleeing from the goblin tunnels, Megan and the others follow the glowing horseshoe's light to a tall peak, on whose pinnacle a castle is perched. North Star explains that it's the home of the Green Mountain elves, who use their home's frightening appearance to keep off unwanted guests. However, since North Star knows them, they're let in. The elves do have the last horseshoe, the one of flight, but it belongs to the infant princess Mae, and by their law nothing may be taken from a child that does not wish to give it. Megan suggests that Mae use the horseshoe to go to Paradise Estate and see why they need it; Mae agrees, and is moved to tears at Mimic's plight. She willingly gives over the shoe, and the Moochick affixes the now-complete set to Mimic's hooves. In a flash of light, Mimic's health and magic are restored, and the day is saved.
This episode contains examples of:
- Chuck Cunningham Syndrome: This will be the last time you’ll ever see Megan- the remaining episodes won’t feature her.
- Flying on a Cloud: The horseshoe of flight creates a cloud beneath the feet of the user and, at their discretion, of the people next to them, which can then carry its passengers through the air at great speeds.
- Gonk: The goblin siblings are comically ugly — besides all being short, squat and green, one has broad and frog-like lips, another a projecting beaklike mouth, and the third a stump-like, flat-topped head with three small horns.
- Hidden Elf Village: The castle of the Green Mountain elves is placed on a remote, inaccessible peak that can be only be reached by flight, and is so high up that for many the air becomes too thin to breathe before the castle itself is even reached. On getting there, their home's deliberately frightening appearance also serves to keep visitors from approaching.
- Made a Slave: The goblins plan to enslave Megan, Spike and the ponies and to force them to work for them.
- Our Elves Are Different: The elves of Green Mountain are diminutive humanoids about as tall as a child, making them about eye level with Megan, have pointy ears, and live in isolation in a castle on a high mountain peak.
- Our Goblins Are Different: The ones encountered here are large, burly green humanoids who tower over Megan, and tend to be ugly and deformed in various unique ways — one has horns and flat-topped head, another flabby wide lips, and a third an almost beak-like snout. They live underground and are greedy, hostile and argumentative beings, stealing from others and refusing to ever give anything away.
- Sibling Rivalry: The three goblin brothers are constantly fighting, arguing, insulting each other and competing for their mother's attention, much to her grief. As it turns out, this is because the magic horseshoe they stole allows them to hear each other's thoughts, which is what keeps setting off their fights.
- Stock Sound Effects: When the horseshoes cure Mimic, they make the sound of a lightsaber activating.
- Telepathy: One of the magic horseshoes allows its wielders to hear the thoughts of other beings as if they were spoken aloud. The goblins use it to find where the ponies are hiding by listening to their thinking, but also get in constant fights when they overhear each other's mental comments.
- Tertiary Sexual Characteristics: The goblin mother, the only female in the group, wears a pink dress and bow, an apron, and low high heels. Her husband wears a sailor outfit.
- The Voiceless: The goblin father has no voice lines. While his wife and sons are all quite chatty, he never speaks a word on screen.
