Alarmed that Walter can’t breathe without his inhaler, Billy resolves to act. Robin Hood proposes attaching the inhaler to an arrow and firing it through the rocket’s porthole. Tom lashes it to an arrow shaft, and Robin cleanly shoots it through a narrow gap in the ship’s single window. Walter calls out his thanks and then asks Billy to find an escape story in Dr. Libris’s study. The Space Lizard’s acidic tongue then sears the window edge, forcing Walter back inside.

The Space Lizard orders everyone away. Billy improvises: If Walter is kept safe, he can re-read Jack and the Beanstalk in the morning and restore the golden eggs. Walter plays along, and the lizard accepts but issues a threat if Walter fails to deliver. Walter then reveals a complication: The lizard’s acid destroyed the book during his capture, so Billy needs a replacement from the study. The remaining characters agree to guard the spaceship through the night, and Maid Marian tells Billy to return before dawn with both the book and a battle plan.

Back at the cabin, Billy retrieves Jack and the Beanstalk and Other Stories from the study and waits until morning, fearing an early return would seem suspicious. He has already planned the attack: Walter will re-conjure Jack, the lizard will give chase, the book characters will shield Jack, and Billy will summon the sharkodile to fight the lizard while rescuing Walter.

Unable to sleep, he reads a Space Lizard comic on his phone in which the villain falls in love with the Intergalactic Gecko Girl. He initially discounts that resolution until a pebble hits his window and Walter appears in the yard. Walter explains that the Intergalactic Gecko Girl appeared by the Space Lizard’s spaceship, allowing his escape. Billy realizes reading the comic accidentally conjured the Gecko Girl. Walter, exhausted and hungry, asks for food.

Billy raids the kitchen and gathers food for Walter. The blueberry pie sparks an idea about saving his parents’ marriage. At the backyard picnic table, he tells Walter they’ll need the Magical Battical cards, the pie, and H. G. Wells’s The Time Machine from the study. Billy warns that the Space Lizard will likely return. Their first stop, however, is the house of Farkas, who’s possibly the only person who knows how to permanently destroy the Space Lizard.

At Farkas’s door late at night, Billy and Walter find the bully playing the Space Lizard video game. Billy invents a story: The island is hosting a secretive holographic competition, and the island version of the lizard is an exact replica of the video game enemy. Since there is no controller, Farkas will call out commands for Billy to type into a fake app on his phone. Farkas agrees on the condition that he’ll claim the entire prize if he wins, and the three travel to the island on his Jet Ski.

On the island, Billy privately reads a passage from The Time Machine, conjuring the vehicle into the meadow. Pollyanna runs in and explains that she gave the Gecko Girl a pie, which infuriated the Space Lizard because the gecko hurried home to share the pie with her mother. The lizard bursts into the clearing. Farkas shouts the cheat code “P.B.C.,” explaining that the lizard mistakes peanut butter crackers for square orange eggs. When typing the letters does nothing, Billy reads the ingredients aloud from a real pack in his bag, conjuring eight enormous floating crackers. Pollyanna coaxes the lizard into eating all eight. Its head inflates, and it explodes in a spray of slime. A grateful Pollyanna kisses Farkas on the cheek, and Billy says there’s one more thing the smitten bully can do.

Billy has Walter cast a “Memory Mop” spell card on Farkas and suggests Pollyanna would enjoy ice cream. Farkas sprints home to get some, trailed by the spell in the form of swarming fireflies. He speeds away on his Jet Ski with no memory of what he was doing on the island. Stranded, Billy leads Walter back to the time machine, places the blueberry pie aboard, and explains his plan to send his parents 15 years into the past to relive the start of their relationship. Walter uses a spell card to dispatch the Junior Wizard in search of a love potion in the hope of making Billy’s parents stay together forever. They leave Walter’s phone in the time machine with an alarm and typed instructions on how to return to the present. To lure Billy’s parents to the island, Walter calls Billy’s father and claims Billy hurt himself while they were hiking. Billy’s father confirms they are both on their way.

Billy needs his parents to board the time machine, so Walter uses a Magical Battical card to summon the Master Wizard, who agrees to make his parents obey a single command before dissolving into a glittering haze around the machine. Hidden behind a tree, Billy overhears his parents acknowledge they both handled their conflict badly. Walter directs them to climb into the device, and, under the spell’s influence, they comply. Billy’s father pulls the lever, and the machine whirls and vanishes. The Junior Wizard reappears with a purple love potion and then flickers and disappears. A deep voice announces the shutdown of the Theta Receptors, and Dr. Xiang Libris steps from the forest.

Dr. Libris confirms he’s been observing the boys via hidden cameras as part of a scientific study. He explains that the wire mesh dome is a Theta Wave Receptor Grid: It captures the theta waves the brain produces during deep imaginative thought and amplifies them into physical reality. Sensors hidden in Billy’s pillow found his imaginative output powerful enough to project beyond the dome entirely. Dr. Libris reveals his true purpose is to commercially exploit Billy’s abilities. He plans to have the boy conjure valuable objects for profit and admits the message in the bottle was simply bait to bring Billy to the island.

Billy demands to know how to retrieve his parents. Dr. Libris dismisses them as unimportant and suggests Billy could conjure superior literary replacements. Billy refuses and insists that Dr. Libris restore the dome so that he can bring his parents back. Dr. Libris says the dome must remain offline while he meets with investors and tells Billy to use his imagination. A black helicopter labeled “Theta Project” descends, and Dr. Libris boards it despite Billy’s protests. Realizing the cinder-block building near the fence must house the controls, the boys approach it. The fence turns out to be unpowered, as Dr. Libris shut off all electricity, and they push through the gate.

Every screen and console inside the cinder-block building is completely inactive. The boys deduce the power supply runs from the mainland through an underwater cable. Before they can plan further, Tom Sawyer and Robin Hood appear despite the dome being offline. Walter theorizes that Billy’s imaginative power sustains these characters without technical amplification. Tom is hungry and asks Billy to imagine some fish. At Walter’s urging, Billy closes his eyes and recites a Dr. Seuss rhyme about a red fish and a blue fish. Robin Hood immediately shouts in delight, and Tom runs off to help haul in the two colorful fish.

Walter pushes Billy to act before his parents are permanently stranded. Billy considers forcing a happy outcome, like compelling his parents to stay in love with a potion, but decides against it. His only goal is to return them with good memories and a fair chance at restoring their relationship themselves. He and Walter hide, and Billy narrates aloud, describing the time machine hurtling back to the present. It appears in a blaze of light with both of his parents aboard. His narration makes the machine disappear and erases all the adults’ strange memories, leaving only the warmth of their first love. The machine vanishes, his parents tumble to the ground and recover, and his father locates the old beech tree where they carved their initials years earlier. Bill compliments Kim warmly, and the two share a tender look.

The moment is broken when the Sheriff of Nottingham stalks from the trees with his dagger drawn, furious at being continually thwarted by Billy. Robin Hood and Maid Marian appear to confront him, followed by the musketeers, Hercules, and Tom Sawyer. Despite being surrounded, the sheriff remains defiant. Billy announces that this time the sharkodile has dragon wings and whistles. The winged creature dives from above, seizes the sheriff, and carries him shrieking into the night. The assembled heroes cheer. Billy’s baffled father asks who these people are, and Billy explains they’re not real. His mother tells his father to relax and go with it.

Billy narrates a short final passage, ensuring his parents lose any remaining memory of the island’s strangeness while keeping what matters, the feeling of first love. All the book characters say farewell, promising to return whenever Billy opens their pages. The boys row the Gillfoyles back across the lake, and his parents walk up the dock hand in hand, laughing together. Billy imagines Farkas rushing to the library at dawn for every Pollyanna book available and resolves never to work with Dr. Libris. Walter still wants to hunt for treasure tomorrow, but Billy reflects that neither he nor his parents need treasure, only the reminder of what they already have. Walter asks Billy if he can conjure free waffle fries. Billy smiles and says maybe he can.