Wilbur's 70-year-old father is engaged to be married, and Wilbur, Carol, and the Addisons are all under the false impression that his bride-to-be is fifty years younger.
Wilbur has been chosen by the Mayor's office as the architect to create, plan, and construct the American History Museum. Of course, Mister Ed feels that the plan should include a statue of a horse in front of the museum.
Ed is attracted to a filly named Penelope, but she only dates horses that are taller than she, so Ed wants Wilbur to provide him with elevated horse shoes.
Wilbur's old commanding officer, Colonel Gordon Kirkwood, and his wife, Winnie, park their house trailer in the Post's backyard, while they wait to settle on their new home next door to Carol and Wilbur - and Ed.
Wilbur spends all of his free time with the Kirkwoods, now that they've moved in next door, and Ed is feeling mighty lonely with no one around to keep him company.
Mister Ed tells Wilbur the story of how a horse was responsible for getting Santa Claus started in the gift-giving business. Meanwhile, Gordon talks Wilbur into entering a pact wherein they limit themselves to spending a mere $15 each on their wives.