Three months after Tex's second attack on the Red Base, Medical Officer DuFresne ("Doc") arrives in Blood Gulch and contacts Blue Command for orders. He reports to the Blue Team to treat Tex, who has already died.[2] Church explains this to Doc, noting how his and Tex's bodies are both buried in front of Blue base. More helpfully, Caboose conveniently recaps the first season, explaining that Church is actually a ghost possessing Lopez's robot body, which has since been spray-painted cobalt. Caboose has also apparently begun to habitually utter death threats to Tucker in a deep, menacing voice. With nobody injured, Doc, on loan to both armies due to a lack of resources, prepares to visit the Red Team next, but the Reds suddenly attack.

With the Reds continuing their attack, Church and Tucker argue over defense strategy. Despite his protest that he is only a medic, DuFresne is officially nicknamed "Doc" by Church, who coerces him into helping by shooting Caboose's pinky toe. Meanwhile, the Reds run out of ammunition, due to Grif's failure to bring extra rounds, and consequently try to bluff the Blues into surrendering.

The two teams negotiate terms. The Reds demand Lopez's return, but Church is loath to surrender his new body; instead, he cedes Doc as a hostage. In return, Grif is forced to publicly humiliate himself, to the delight of all, particularly Sarge.

In order to repair Sheila, Church and Tucker try to determine how to activate the repair sequence in Church's robot body. Church only manages to find the time and temperature function, but Tucker discovers a small switch on Church's crotch. When flipped, it activates a strange beeping noise audible only to Church. Back at the Red Base, the Warthog begins to beep, and announces that its homing beacon has been activated.

Sarge reveals that he had put a remote control in the Warthog to allow Lopez to drive it remotely. Meanwhile, Church, who cannot stand the remote's beeping sound, begs Tucker and Caboose to deactivate it, but the switch breaks. While the other Blues continue trying to help, Church unwittingly causes the Warthog to scoop up Doc and then to attempt to kill Sarge. Having pinned the latter against the wall of Red Base, the Warthog slowly advances its firing machine gun toward his head as the episode ends.

Tucker disconnects the wire that had connected to Church's switch, thereby stopping the beeping noise, but also disabling Church's legs. The Warthog deactivates, sparing Sarge. Driving the Warthog, Doc attempts to unpin Sarge, but only manages to ram him into the wall twice more, and the Reds consequently decide to return him to the Blues. When Simmons and Grif arrive at the Blue Base, they see Tucker still kneeling in front of Church attempting to repair his legs, and quickly jump to conclusions.

The Blues refuse to accept Doc back from the Reds, fearing that he might be spying for them. The Reds eventually give up and return to their base. Doc attempts to return with them, but the Reds quickly ditch him, leaving him alone. Doc attempts to return once more to the Blues, but they remain suspicious of him and reject him again.

At the Red Base, Donut unsuccessfully attempts to engage Sarge in idle chatter while waiting for Simmons and Grif to return. The two eventually do arrive back and report their failure. Back at the Blue Base, with Church still immobile, Caboose suggests that Church leave his body, so that Lopez can make any repairs to himself and Sheila. After expressing surprise that such a clever idea had come from Caboose, Church and Tucker endorse the plan. Church leaves Lopez's body, but Tucker and Caboose pay no attention to Lopez, who flees before Church can reappear in spirit form. The Blues then chase after him. Meanwhile, the Reds spot Lopez running toward their base, and mistake him for a Blue. Sarge and Simmons prepare to counterattack, while Donut annoys Grif with more idle chatter.

Tucker and Caboose catch up to Lopez, who refuses to re-join them and instead orates at length about oppression and the advent of a new day for his people. Sarge and Simmons try to run him over with the Warthog having mistaken him for a Blue soldier, but Lopez activates the Warthog's remote destruction sequence in self-defense and, feeling betrayed, defects to the Blues.

*

Released on April Fool's Day and the anniversary of Red vs. Blue's first episode, the episode begins with Grif and Donut crying over the graves of Sarge and Simmons, following the events of episode 28. Sarge appears and explains that he had only been napping, and had escaped by eating his way out of the ground with his spoon. Simmons' ghost appears to give the Red team a warning, but Donut shoots and kills him, explaining that Simmons' ghost is actually "Ol' Man Caboose". Tucker and Doc appear and announce their engagement, over which a French-speaking Lopez, apparently in love with Tucker, laments. Church awakes and realizes that this episode had apparently been merely a dream, when he finds himself confronted by the French-speaking Lopez.

The Blues convince Lopez to repair Sheila. As he works, Grif spies him through a sniper rifle and assumes that there is a "new" Blue soldier. The Red Team discusses various explanations. Donut manages to guess the truth, but no one believes him. Once Lopez finishes repairs, he and Sheila fall in love with each other, much to Caboose's dismay. To disrupt the odd love triangle, Church attempts to possess Lopez again, but is unsuccessful; instead, it is Tex who suddenly appears in Lopez's body.

While Caboose talks to a now-confused Sheila, Tex reveals to the rest of the Blues that she had been watching them for some time and had noticed Caboose's aggressive behavior. She explains that her former artificial intelligence (AI), O'Malley, had jumped via radio to Caboose when it had assessed that she was unlikely to survive her second attack on the Red Base at the end of season 1. Using Lopez's body as a bargaining chip, she asks Church's help in killing the AI. Meanwhile, at the Red Base, Sarge realizes that the Reds no longer have anyone with an ability to repair things and, after some arguments, prepares to turn Simmons into a cyborg.

Tex explains that everyone in Blood Gulch must turn off their radios so that O'Malley will be unable to jump into someone else's armor when flushed out of Caboose. The ghosts of Church and Tex jump into Caboose's mind to find O'Malley. They meet Caboose's mental image of Tucker, as well as Caboose's inner self. The real Tucker and Lopez take Sheila to the Red Base to convince the Reds to turn off their radios.

In Caboose's mind, Tex and Church meet Caboose's mental image of the latter — vulgar, insulting, and under the impression that he is "Caboose's best friend". At the Red Base, Donut and Grif search near the Warthog for a part needed for Simmons' cyborg operation and begin to panic when they see Sheila, Tucker, and Lopez approaching. The episode ends with Tucker having difficulty in trying to brake Sheila.

Donut flees from the approaching Blues, but, still unable to brake, Tucker runs over Grif and the Warthog with Sheila. Tucker radios the Red Team to tell them to turn off their radios. Initially they refuse, so Lopez sings a love song about Sheila over the radio until they relent. Meanwhile, Church and Tex meet Caboose's mostly incorrect mental images of the Red Team. O'Malley suddenly kills Caboose's mental image of Church — thus making Caboose completely forget who Church is — and the real one and Tex subsequently give chase. Eventually trapping O'Malley, the two, hoping that Tucker had been successful, shoot him, chasing him out of Caboose's mind. Without any means of jumping to another armor, O'Malley signals "cockbites" in Morse code as he gradually fades. However, in a scene deleted from the DVD he detects one last radio transmission from Doc, who is attempting to contact Blue Command, and takes possession of him.

Disoriented from the events of the previous episode, Doc discovers a hovercraft in a cave and consults with Vic, who proves to be unhelpful. Meanwhile, Tex has disappeared, and Grif awakes from surgery to find that Sarge has replaced most of his organs, which had been damaged in the accident with Sheila, with those left over from Simmons' cyborg operation.

Caboose is jealous of the relationship between Lopez and Sheila, who are now refusing to work due to perceived poor treatment by the soldiers — that is, being repeatedly blown up, possessed or left outside to rust. Eventually, they consider forming their own robot army. At the Red Base, Sarge sends Grif and Donut out to try to spy on the Blue Team. While on the mission, Grif, who cannot stand Donut's childish behavior, tricks him into exploring the caves by himself. Donut then spots Doc and O'Malley talking to each other, in the manner of Gollum and Sméagol in The Lord of the Rings. Overhearing O'Malley's evil plans, Donut tries to return to his base, only to become lost and eventually captured at the Blue Base.

As a note, "Nut. Doonut." — a reference to James Bond's introduction, "Bond. James Bond." and use of two 0's in his agent number, 007 — is the episode title as listed on the Rooster Teeth website and on the Red vs. Blue: Season Two DVD. However, the six versions downloadable from the Internet show different titles, each another reference to the James Bond series (specifically, the six starring Sean Connery): "Blunderball" - Thunderball, "Dr. No-No" - Dr. No, "You Only Spawn Twice" - You Only Live Twice, "From Blood Gulch With Love" - From Russia with Love, "Dummies Are Forever" - Diamonds Are Forever, and "Pinkfinger" - Goldfinger.

The Blues attempt to interrogate Donut, without much success. Church then possesses Donut and, using him as a hostage and a puppet, negotiates with the Reds to have them to build new robot bodies for himself and Tex. While Tucker continues to haggle with Sarge over the specifications for the robots, Church leaves Donut's body and returns to Blue Base to find that Lopez and Sheila are missing.

Church discovers a note from Sheila and Lopez confirming that they have started a robot army. At the Red Base, Sarge unveils the two new robots; one contains a microphone to spy on the Blues, and the other contains a bomb. The Reds and the Blues meet in the center of the gulch to execute the exchange. Sheila and Lopez also arrive to conquer the Blues; Lopez becomes angry at seeing new robots brought into the conflict, and rushes forward to attack. A tense Mexican standoff results, and Sarge tries to call an air strike. However, due to crossed communication channels, Tucker intercepts his message, and realizes that Vic is apparently working for both Red and Blue Commands. While Church possesses one of the robots, Tucker tries to alert everyone that Red and Blue are the same, but is hit by a rocket before anyone can understand him. His attacker is apparently Doc, possessed by O'Malley, who flies around on the hovercraft, firing rockets at will. In the ensuing chaos, O'Malley takes Lopez as a hostage, announces his intention to conquer the universe, and disappears through the Red Team's teleporter. The Reds and Blues call a temporary truce to pursue Doc, whom the Blues need to heal Tucker, and to retrieve Lopez, whom the Reds need for the plans his memory contains. Donut, Sheila, Tucker, and one of the robots remain behind in the gulch while everyone else follows through the teleporter. Tex soon surfaces in the remaining robot body. Unfortunately, due to a teleporter malfunction, the pursuing Reds and Blues end up separated and scattered across different places. Simmons ends up in a huge area full of teleporters, Church and Grif end up captured by Max Gain, a member of the Red team in Sidewinder, and Sarge and Caboose appear in the stream in Battle Creek.