Mike and Sully work to treat a typhus epidemic at Black Kettle's camp, which begins after Mike and Sully unwittingly convince Black Kettle to accept government blankets infected with the virus. Mike is heartbroken and guilt-ridden as she battles the tribe's typhus epidemic. When Matthew comes down with typhus, the town panics and locks the children in the clinic alone with Horace. Colleen treats Matthew and Horace contrives to send the kids out to the reservation to be with Mike. Meanwhile, the town prepares for the Fourth of July, ironically missing the point entirely that the first Americans, the Indians, are being systematically wiped out and further, that the newest Americans, the Immigrants, have just had their camp destroyed by the typhus-fearing townsfolk

Mike and Sully get caught in the crossfire when, while visiting the Indian reservation, they see renegade Dog Soldiers shoot some Cavalry men. Mike is kidnapped in retaliation when the Indians discover she told Custer what happened; Sully vows to find her. Meanwhile, Brian falls in love with a horse Hank wins in a poker game.

Sully sets out to rescue Mike. Meanwhile, Custer takes the Indian reservation hostage, threatening to hang everyone unless Mike is returned. Brian works off the cost of the little horse; but Hank reneges on the deal, inciting Loren's wrath. Mike and Sully return to town just in time to keep the Indians from getting hanged. Hank, not anxious to pay double for all his goods at the General Store, delivers Taffy to Brian on his birthday, declaring that, ""Sometimes it's just good business for a man to keep his word.""