Curious about the motives of Santa, Haruhi sets Kyon to keep watch for him whilst everyone else has a Christmas Party. They encounter Taniguchi, who dressed up as Santa to return an unwanted Kappa he stole from the computer club. When Haruhi sees (bit doesn't recognize) him, her powers transform him into what she envisioned Santa to look like and chases him until he is apprehended by Yuki and Tsuruya. He escapes, but returns to normal.
Kyon is joined by Mikuru, Tsuruya and Yuki, who find a stone that Yuki breaks, releasing a spirit. Whilst trying to figure out how to dig his hole, Kyon is interrupted by Arakawa who "randomly" stops by, and Mori who creates a giant crater. Unable to explain the situation to Haruhi, Kyon takes all the credit.
Using the balloons she got from Kyon, Yuki makes Ryoko a living balloon dog, although its creation is a little horrifying. Whilst having fun with it, Ryoko walks into another trap laid by Yuki, with assistance from the dog, who suddenly talks and calls himself Kimidori. Ryoko is attached to balloons that Yuki filled with hydrogen, which causes the balloons to detonate in a large explosion when one of the balloons is heated by a ceiling light.
Yuki hides Ryoko in a little box before Haruhi, Mikuru and Tsuruya come over to make Valentine's Day chocolates. Haruhi's plan to make a life-size chocolate Mikuru is deemed impossible, so the remaining chocolate is fashioned into smaller sculptures, truffles, and small chocolate cakes. Once the 3 girls leave, Yuki lets Ryoko out of her box, and shares a chocolate cake with her.
After a small half-asleep scuffle with Ryoko, Yuki heads out for a Sunday morning with the SOS Brigade. Ryoko tries to clean the apartment to take her mind off things, but grows upset being stuck inside. Using an umbrella, she manages to try and leave the building (to kill Kyon and provoke a response from Haruhi, as per her original mission), only to return to the apartment when a cat hungrily eyes her.
Mikuru informs Kyon of extra outfits found on the clothes rack in the corner. When informed that they belong to Yuki, a small-scale cosplay 'war' breaks out. At the end of the day, Yuki finishes an anime series she has been following, and lends her collection to Kyon. Mikuru grows upset when she sees the lead character of the series is a maid, scaring her into thinking Kyon is into 'maid moe'. Ryoko is annoyed at how Yuki keeps putting her in baby things, although can't help but fall victim to her idea of fun.
Mikuru finds out that Yuki is viewing erotic images on her laptop, but is too embarrassed to tell what she's seen to Kyon. Several weeks go by, and several changes are noted. Kyon finds that the bookshelves in the room are being filled with video games, and Haruhi begins to notice Yuki wearing cosplay outfits. When Mikuru finds the outfits, a cosplay war breaks out. Meanwhile, Ryoko has revived herself, but in a foot-tall chibi form. Eventually, Yuki finds out, and after saving the miniature Ryoko from a hungry cat, allows her to stay with her at her apartment.
Mikuru finds the clubroom deserted, with a TV set on the table. Mikuru turns it on, to find she is the audience of a local quiz show, in which Haruhi is the host, and Kyon and Yuki are the contestants. However, Haruhi's attempts of making the quiz more local go a bit too far, resulting in Kyon being killed (then revived) by fireworks and a truck. Meanwhile, Mikuru ignores the show and instead plays with her small lion-like pet.
Kyon first arrives at the clubroom, only to be deafened by Haruhi who is throwing a tantrum because she is bored, which drives away a client. Shortly thereafter, Kyon finds Yuki playing an eroge on her laptop with the volume turned up. Kyon provides her with a set of rabbit-shaped headphones to keep the 'questionable sounds' from being heard in the room. Shortly afterwards, Kyon is accosted by Ryōko Asakura who attempts to kill him, but is stopped by Yuki. Before she fully dies, she informs Kyon that there are others who will attempt to kill him besides her, only to be interrupted by an exasperated Kyon, who nonchalantly states "the butler did it".
Kyon returns home from a tiring day, only to have his little sister reprimand him for leaving her alone and forcing her to play with a now-unconscious Shamisen. Once Kyon falls asleep, the SOS brigade appear in his New Year's Dream, with Koizumi, Yuki and Tsuruya appearing as Mt. Fuji, an Eggplant and a Hawk, respectively.