Up in the clouds in Fairy Tale Land, a fairy crash lands on a cloud, spilling some fairy dust. The Blue Fairy tells her to be careful because the fairy dust is the most precious substance in all the land and it's magic is what powers the world. She tells the younger fairy, Nova, that the fairy dust she is carrying is the year's supply. Nova wants to be a fairy godmother by the next year but the Blue Fairy laughs at the mention of that, "Oh, Nova -- you really are a dreamer. Your journey is just beginning. " The Blue Fairy asks Nova if she can make it home safe with all the fairy dust. Nova nods but when she clumsily takes off after the Blue Fairy, she loses some fairy dust from her basket. That fairy dust floats downward on the shifting winds and lands on an egg in the egg field of the dwarf mines. Immediately, the egg starts moving as two dwarfs, Watchy and Bossy, wonder why this particular egg is hatching early. Then, the dwarf we've come to know as Grumpy hatches fully grown -- with a beard. He looks around, eyes wide with amazement.
At Granny's dinner we find Leroy, the Storybrooke version of Grumpy, cracking open his own hard-boiled egg as he eats his breakfast. He gets surly, when Mr. Clark and Walter -- whom we know as Sleepy and Sneezy from Fairy Tale Land -- walk up and ask if Leroy can move onE seat over so they can sit together. After Mr. Clark sneezes on his food, Leroy gets up in disgust to leave but just then Mary Margaret walks in the diner and tries to get volunteers to help with the Miner's Day festival. No one in the diner answers the call. Instead, everyone looks her over with judgey eyes and whispers. Emma clocks this from her seat. Mary Margaret tries to recruit Leroy on the way out but he shuts her down, "Quite a team we'd make. Town harlot -- town drunk. The only person in this town that people like less than me is you. If you're coming to me? You're screwed?" He walks out the door leaving Mary Margaret shaken at the dig. She turns and heads outside with Emma on her heals. Emma tries to comfort Mary Margaret who's upset because all of her volunteers backed out. A few of them told her it was because of what happened with David and she laments, "I've never been a home wreaker before." Emma gets a call and has to leave but tells Mary Margaret to hang in there and that she's there for her. This brings a smile to Mary Margaret, "I know."
Leroy is walking through the preparations for the Miner's Day festivities when someone on a ladder spills glitter on his head. At first he's angry but when he looks up he sees the sweet face of a nun, who in FTL was the fairy Nova. Leroy is smitten. She climbs down and cleans the glitter off of him. He smiles at her and offers to help with the lights that aren't working. He climbs up onto the ladder and fixes the lights she was having trouble with. She calls Leroy her hero and tells him her name is Astrid. He shares with her that he wanted to sail around the world and even bought a boat to fix up. She tells him someone once told her that you can do anything as long as you can dream it. Leroy isn't sure but Astrid is unflappable in her optimism, "Sure. Look how easily you fixed those lights. I bet you could do anything." Leroy is all smiles as she heads back to the volunteer center.
On the road leading out of Storybrooke, Emma is taking photos of Kathryn's crashed car on the side of the road when Sidney shows up wanting to take pictures for a story. When Emma finds Kathryn's clothes in the trunk she believes something may have happened to her and decides she needs to get Kathryn's phone records to find out whom she spoke to last. Sidney tells her if she goes through the sheriff's department it'll takes days. He has a contact at the phone company he used when he was a reporter and can get those records in a couple of hours. Emma agrees and tells Sidney to let her know as soon as he has them. When David pulls up both Emma and Sidney wonder aloud if he knows anything.
In Fairy Tale Land, Grumpy along with the other seven newly hatched dwarfs are being put through the paces. After asking Bossy who the woman he saw was, Bossy tells him he must have been dreaming. He then tells Grumpy what dwarfs like him are, "There are no female Dwarfs. Dwarfs don't fall in love. Dwarfs don't get married. And Dwarfs don't have children. Why do you think you were hatched from an egg?" When Grumpy is still confused, Bossy tells him that they do the most important thing in the world, they mine the diamonds that are ground into fairy dust that give light to the world. Grumpy and his seven brethren are then told to pick up their new pick-axes. This will give them their Dwarf name when it is magically engraved on the wood handle after they pick it up. The first one to pick up the axe and get their name is Stealthy. Then the rest get their names. When Grumpy picks up his axe, the name that magically engraves itself on the handle is Dreamy. Huh? Grumpy's name wasn't always Grumpy. Then they all march off into the mines.
Back in Storybrooke, Leroy finds Mary Margaret at the volunteer center and tries to sign up to sell the nun's candles with her. She reluctantly agrees because as he points out she has no one else. Across the room, he watches as Astrid is scolded by the Mother Superior (the Blue Fairy in FTL) for ordering twelve dozen tanks of helium instead of just a dozen. Leroy asks what's wrong and offers to help. Astrid tells him she messed up and spent all their stipend money on helium and now they can't pay their rent. She tells him Mr. Gold won't give them any leeway and if they miss a payment they'll be evicted. Leroy tells her he'll help sell all of their candles. Mary Margaret over hears this and wonders what Leroy got them into. Astrid smiles and tells Leroy that he's her hero.
At Kathryn's wrecked car, Emma asks David if he knows what happened to Kathryn. He's confused and tells her he has no idea. She knows when people are lying and believes him. Emma tells him she'll find out what happened to Kathryn.
Regina is at her office when she gets a fax with the phone records Sidney requested. She calls Sidney, thinks the records will be quite helpful.
In Fairy Tale Land, Dreamy is working in the grinding cavern shoveling diamonds onto a belt that feeds grinder and turns it into fairy dust. Meanwhile, Nova is at the bottom of the machine collecting the fairy dust. When she has trouble shutting off the fairy dust dispenser, Dreamy comes to her rescue and shuts it off for her. It's then that he recognizes her as the girl he saw in his dreams just before he was hatched. She gets distracted and puts the fairy dust on the conveyor belt that leads to the grinder. Before the fairy dust can be lost, Dreamy climbs up onto the belts and saves the bag of fairy dust. Nova gets down on herself because she wants to be a fairy godmother but doesn't think she can do it. Dreamy tells her he thinks she'd make a great fairy godmother, "I believe you can do anything you want, as long as you can dream it." Nova is smitten. She tells him that she's going to Firefly Hill to watch the fireflies, not-so-subtly hinting that he should join her. Dreamy smiles but doesn't pick up on the hints and they go their separate ways.
Back in Storybrooke, Mary Margaret and Leroy try to sell the nun's candles at the Miner's Day Festival but have no luck. Leroy says they need to go door-to-door, then people will buy the candle just so they'll leave. Emma tells Sidney she just got off the phone with Kathryn's law school in Boston, "Registration was this morning and she never showed up." Sidney accuses Mary Margaret of having a motive but Emma stanchly defends her and tells him to get her those phone records. Meanwhile, Mary Margaret and Grumpy get door after door shut in their faces as they attempt to sell the candles.
At a tavern in Fairy Tale Land, all eight Dwarfs are eating, drinking and making merry, except Dreamy. Bossy Dwarf tells him it must be in his head but then a voice from a table over tells him, "You're in love." Grumpy turns to find Belle. He asks her what love's like. She tells Grumpy he's feeling bad because he needs to be with the one he loves. She explains that Nova was giving him hints that meant she was inviting him to go be with her. He's surprised. Belle gives him a reassuring smile and tells him to go, "Find your love. Find your hope. Find your dreams."
At the volunteer center, Leroy is prompted by Mary Margaret to give Astrid the bad news that they hadn't sold any candles. But when he is about to tell her, he can't bring himself to deliver the bad news and instead tells her a lie, that they sold all the candles. Astrid is ecstatic, then jumps in his arms and gives him a big hug. Mary Margaret is pissed and tells Leroy it's five thousand dollars they don't have. Then she realizes he's doing this because he's in love with Astrid. He tells her he'll get the money.
On Firefly Hill in Fairy Tale Land, Dreamy is running to the top to meet Nova. She's waiting for him and then walks him over to the edge to look at the lights of the kingdom. She laments that flying over the world and being part of it aren't the same thing. Dreamy says all he sees are the mines but then he comes up with an idea for both of them to sail away on a boat and see the world together. She loves the idea and gives him a kiss. They plan to meet at the same spot the following night.
Back in Storybrooke, Leroy is trying to convince Mr. Gold that his fixer-upper sailboat is worth five thousand. Mr. Gold thinks it's only worth three thousand. Leroy tells him he needs five thousand to help the nuns out so they can pay their rent. That's when Mr. Gold balks. He tells Leroy he will not help out the nuns and it will be a great relief to evict such distasteful tenants. Leroy asks who doesn't like nuns, Mr. Gold flashes that malevolent smile, "Oh, I have my reasons. And they're mine. Let's just say I have a long, complicated history with them. And leave it at that." Leroy heads inside the boat defeated. Then Astrid shows up on the dock outside to give Leroy a pie for all of his help. As she admires the boat, she spies the unsold candles under a tarp. Leroy finally comes clean and tells her he lied about selling all the candles because he didn't want to disappoint her. Astrid walks away full of disappointment as Leroy watches her go just as disappointed in himself.
At the Sheriff's Station, Sidney delivers Kathryn's phone records from the day she went missing. He points out there was an eight minute call from David within an hour of the accident. Emma tries to defend David because he said he hadn't spoken with Kathryn the day of the accident and because she knows when someone is lying. Sidney presses his belief that David lied. He tells her it's right there on paper and that phone records don't lie, people do. Sidney, "Don't beat yourself up over this. You're not the only person David fooled." Emma mulls over this massive revelation.
Mary Margaret is at Granny's diner taking a long sip of a stiff drink when Leroy walks in. She asks him hopefully if he got the money but he gives her a look, "What do you think?" She is beyond bummed, "I think you're right -- I was dreaming if I thought the town harlot and the town drunk could accomplish anything." Leroy joins her with a stiff drink of his own.
At the Dwarf's hovel in Fairy Tale Land, Dreamy attempts to sneak out to meet Nova when Stealthy stops him, "You know if you wanted to sneak out you should have come to me." The other Dwarfs wake up and ask where he's going. He tells them he's in love with Nova and they're going to see the world together. Stealthy thought they'd spend their whole lives in the mines. Dreamy tells them things change when you fall in love and anything seems possible. They try to give him his pick-axe but Dreamy says he doesn't need it anymore. The Dwarfs are happy for him and they all gather around to give him hugs farewell.
On his way to meet Nova, Dreamy is waylaid by Bossy Dwarf. He tells Dreamy he can't go be with Nova because he has a responsibility to mine the diamonds that make the Fairy Dust. When Dreamy says he loves Nova, Bossy tells him Dwarfs aren't capable of love. Dreamy asks what if he's different, "What if you're wrong?" Just then the Blue Fairy appears and tells Dreamy that Bossy is not wrong, "What you feel is just a dream." She explains that she is Nova's teacher and that if they run away together, Nova will lose her wings. She tells him that if he returns to the mines and allows Nova to become the fairy she was meant to be, the two of them will bring untold joy to the world. Then she lays on the guilty, "Nova can be a great fairy. If you let her. The choice is yours."
At Granny's diner back in Storybrooke, Mary Margaret tells Leroy that a relationship between him and Astrid can't work. He knows but says Astrid was first person who believed in him. Mary Margaret laments that she's a pariah in the town. When he asks if she regrets the good memories with David she tells him of course not. He tells her that's what life is about, "Holding onto your good memories." He says that all he wanted was one moment to with Astrid to give him hope that any dream is possible. Then he tells her she had all that, "So stop feeling sorry for yourself and enjoy it." After both realize that drinking isn't going to make them feeling better, Leroy has an idea.
On the rooftop of one of the buildings surrounding the festival, Mary Margaret watches as Leroy decides to get his moment by slamming a pick-axe through the electrical transformer. Sparks explode into the air as the festival below goes dark. Mary Margaret asks what he's doing, Leroy "I'm selling candles, sister."
In Fairy Tale Land, Dreamy finds Nova on Firefly Hill. She shows him the boat she got for them to explore the world together. At the height of her enthusiasm, he gives her the bad news that they can't be together. She tells him he's special and controls what happens in his life. When he asks what makes them different, she tells him their love. He says she's meant to be fairy godmother and he won't stand in the way of her happiness. She pleads with him, "But you're my happiness. I love you. Don't you love me?" With his heart breaking, "I'm a dwarf. I can't love." And with that he walks away, giving up his dream and leaving Nova devastated.
Dreamy returns back to the mines. Everyone is happy to see him but it's a different Dreamy now. He's got an edge to him. He gets his pick-axe back, the one with the Dreamy on the handle, then starts smashing the earth repeatedly with ferocity that breaks his axe. When he's handed a new axe the name that appears is no longer Dreamy, but Grumpy. Yes, this is how Grumpy got his name. He then continues doing what he was born to do.
At the Miner's day festival back in Storybrooke, Mary Margaret and Leroy sell out of all the candles. Mary Margaret tells him to have his moment with Astrid. He gives Astrid the good news and the money from the candles. She tells him he made it happen. Leroy tells her that he's gonna fix up his boat and would like her to be his first passenger. She smiles, "I'd like that." The both turn to admire all candles lighting up the festival.
Emma is at the Sheriff's Station going over the phone records and highlights the eight minute call David made to Kathryn the day she disappeared. Regina shows up and demands to know if she's found out anything. Emma says she's found something but doesn't know what it means. She won't divulge that information to Regina. Regina tells Emma, "If you're covering for someone, if you're not doing your job, I'll find someone who will." After laying out her threat, Regina leaves.
Back at the Miner's Day festival, Mary Margaret wraps up her candle booth and heads to her car to leave. When she gets to her car she stares at the residual paint that still spells out TRAMP on the driver's side. Instead of leaving she gathers herself and heads back to the festival with an unlit candle in hand. Granny stops her and smiles. Holds out her candle and uses the flame to light Mary Margaret's. And as she does so, we see her welcomed. No one shuns her. This is her first step back. David is watching Mary Margaret from a distance when Emma walks up. She tells him they need to talk. He asks if she got a hold of Kathryn. Emma looks serious, she hasn't but needs him to go the station and tell her everything. He thought he already had. Emma not enjoying this, "So did I. Come on." And David realizes he doesn't have a choice. As Emma leads him away, David can feel the stares. She puts him in the back of the squad car. Mary Margaret sees this and looks shocked. David sits in the back of the cruiser not knowing what will happen next.