Spoiler alert: The following section contains plot-specific details.(Skip Section)
This section needs images
The episode begins with King Dedede and Escargoon heading to the throne room. Dedede is furious with NME for treating him as a normal customer and wants recognition for his business, despite Escargoon saying he might get them if he payed the bill. He calls Nightmare Enterprises and demands "respect". (In the Japanese version, Dedede is upset that he didn't receive any New Year cards or gifts from Customer Service) Customer Service apologizes and sends a complimentary gift - a big pile of pillows. Only, these pillows cause horrible dreams about Dedede's worst enemy, so bad the Cappies would attack Kirby themselves.
Kirby has been sleeping the day away, ignoring an irate Torkori. Frustrated the bird turns on the T.V. On Channel Dedede, the King is in the middle of a comedy routine with a Kirby puppet talking about sleep. At the castle Tiff's parents are watching this "junk" because its the only channel they get in Cappy Town. Tiff refuses to watch such a display but Lady Like shushes her. The King and Escargoon offer the pillows as "Delightful Dreams Pillows" advertising wonderful dreams for free. Oh and pillow cases. Tiff's family likes them to her dismay, as does Torkori back with Kirby. Tiff rushes to Meta Knight who is also watching the broadcast with Sword and Blade. Meta Knight is hesitant to call it a scam, willing to give the king the benefit of the doubt. Tiff angrily agrees.
That night, everyone but Kirby is sleeping peacefully on the "Dream Pillows". Back at the castle Dedede wonders if the pillows really work, Escargoon wonders if anything from NME ever worked. Dedede forces the snail to try the pillows for him only to fall asleep on one as well.
At the headquarters of NME, Customer Service tells the shadowy figure of Nightmare that everyone in Cappy Town will now dream whatever they want them to. Nightmare and the salesman laugh evilly.
Tiff, and everyone else, has a horrible Nightmare about Octacon eating the village sheep. Tuff comes into her room after having the same dream and stays "keeping his sister company". Tiff stays up to think but falls asleep again. Another "dream" gives us a flashback to the pilot during Kirby's arrival on Pop Star and his later battle against Octacon. One by one each villager dreams of Kirby causing trouble for him throughout the episodes (though not always his own fault). Tiff also dreams of her conversation with Meta Knight and Kirby and the Star Warrior's history. She wakes talking about destroying Kirby, as did Tuff but she snapped them out of it. Meta Knight appears, having already discovered the plot.
The villagers, King Dedede and Escargoon are already surrounding
Kirby's house, when Tiff and the others arrive. Meta Knight slices the pillows open, revealing the cause, Noddy, which breaks the hypnosis. Meta Knight explains that Noddy causes nightmares. The knights collect the pillows and release the monsters, who run off into the night.
Turns out Kirby was asleep the whole time. Dedede forces Kirby to sleep on a leftover pillow, He dreams of his different beatings throughout the series at the hand of the monsters, tricked friends and Meta Knight. He screams and runs off, only to stop and realize it was a dream. Meta Knight frees the laughter over Noddy as the others laugh. Kirby is angry at first but realizes it was pretty funny. He jumps into the air smiling.
Strangely, the whole plot of the Japanese version taking place during New Year was removed entirely in the dub, and the episode runs like any normal day. This is possibly because the previous episode is known as the New Year celebration for Kirby, and due to this episode airing at around October in USA, the New Year special was delayed. With this in mind, the scene where Customer Service is celebrating the New Year in Japanese getup is replaced with recycled normal-screen animation. All clips from "Cappy New Year" in Kirby's dream are removed as well.
The scene when Chief Bookem and Buttercup were dreaming about Kirby is removed in the dub. Its removal may be because he had a dream about a deleted scene from the dub version of A Blockbuster Battle (the one were Kirby accidentally starts shooting with a gun), in which guns are violent for a children's program.