Jane learns that she is pregnant, but doesn't tell Michael because he hadn't seemed thrilled by the prospect of having kids. She tries to get an abortion secretly, but changes her mind. Michael is furious at Jane for keeping him in the dark, until the joy over their child brings them back together. Billy is given a column in the neighborhood newspaper. He can't come up with a topic because his life is boring. Hoping to alleviate this problem, he convinces Jake and Matt to go bungee-jumping with him. After he is unable to go through with the jump, Billy writes a column about ""wimping out.""

Billy is depressed when the Melrose Times folds. He asks Alison to accompany him on a visit to his parents' house, then pleads with her to pose as his girlfriend. Billy tries to convince his parents that he is on the verge of becoming a successful writer, but is roped into helping run his father's furniture store because of a deal the two once made. He quits in a huff after his father questions his sales techniques, and later asks his dad to let him live his own life. Sandy gets a swelled head after landing a part in a horror movie, and ends up moving out. She comes down to earth after the director tries to insert nudity into one of her scenes. Michael injures himself at the apartment. He and Jane discuss their excitement and anxiety about the upcoming birth of their baby.

Alison undergoes successful surgery, and Billy agrees to care for her when she returns home from the hospital. They both become frightened by how much they have come to care about each other. Jake and Jo observe that the necklace Billy plans to give Alison for Christmas is more than a ""friendship"" present. Billy disagrees, but decides not to give Alison the gift after she makes him agree to a ""no presents"" pact (because she is short on cash). Alison fears that she has hurt Billy's feelings. She later apologizes, and he gives her the necklace. They admit that they have become confused by their feelings. Jo and Jake try to overcome their unhappy memories of Christmas. He is excited about making a fresh start, but she remains cynical and wants to ignore the holiday. She also tries to push Jake away, but they end up having a hot make-out session. Michael is depressed when he and Kimberly cannot save a young gunshot victim, but his spirits are revived after delivering a baby for t

Jane throws Sydney out, but Amanda leases her an apartment in the building. Alison travels to a ranch to make a presentation to millionaire computer exec Steve McMillan, but it does not go as planned. Matt decides to marry Katya. Michael sleeps with Sydney while Kimberly is out of town at a conference.

Jake and Amanda pull out of Reed's business when Jake discovers some inconsistencies in his story, but Jo accuses him of jealousy. Reed picks up a shipment of drugs on the boat while Jo is sleeping on board. When Jo discovers drugs stored in a compartment below deck, Reed assaults and kidnaps her. Sydney overhears a semi-comatose Michael babbling about his plea for Matt to change his blood alcohol results. She lays the groundwork for a blackmail scheme. Frustrated by her inability to get in touch with Billy, Alison flies to New York to surprise him. She is stunned to find him having drinks with another woman. Jeffrey is transferred to the east coast after coming out of the closet.