The Demon Chi briefly escapes from the Containment Unit. All of them are retrieved, except for the Earth Demon chi, which flees Section 13 and inhabits the body of one of Jades' Friends Larry (a comic book nerd, who also loves Super Moose) who proceeds to use his new demon powers for good as the superhero Spectacularry. Unfortunately he causes more problems than he solves. To prevent Draco obtaining the Earth demon Chi Jackie, Jade and Uncle Head to where any comic nerd with super powers would go, a comic fair.
But the Demon Chi is slowly overwhelm Larry's good nature and with Drago closing in, Jackie, Jade and Uncle must save Larry before his super heroics destroy all around him. After capturing the chi of Hsi Wu, the sky demon, Uncle attempts to place it in the chi containment unit. However it is broken, so the chi must remain in the chi-o-matic. Thinking that it is empty, Jade then takes Uncle's chi contraption with her on a school field trip to a haunted doorknob museum. Jade's teacher, Mrs. Hartman confiscates the chi-o-matic and accidentally infuses herself with Hsi Wu's chi.
Things get worse in the haunted house when Drago appears and the ghosts get angry at the presence of two demons in their house. The Enforcers are released from prison and are required to finish off their sentence by doing community service. Jackie begins tailing them, watching their every move. They have become suspects in his investigation into the failed attempt by three unknown assailants to steal the valuable golden squid, which is being showcased at the museum. Meanwhile, Jade who quit the buttercup scouts due to sheer boredom has joined the dragon scouts in a quest for more adventure and excitement. Jade becomes very suspicious of three specific members of the scouts when she and Jackie discover that they are the nephews of the Enforcers. She begins following and watching them, hoping to catch the three kids doing something illegal.
Uncle has fashioned a locater for the activated relics. As Jade watched a game show called, 'The International Island Challenge,' the locater senses the next relic, which is the prize on the game show: the gourd containing the Water Demon's chi. Jade pleads Jackie to let them enter the contest held on Boru Island, but Jackie explains that this is a serious mission. However, on the set, the producer mistakes Jackie, Uncle, Jade, and Tohru as a competing family.
They must face off against the Dusseldorf family, but they fail in the first task when Tohru falls off the bridge after being pelted by coconuts. However, it is Uncle who is voted out of the family, but he manages to stay on the island for the night after complaining about his supposed fear of flying.
In the second round, neither family wins the bug-eating contest, so they must race in the tie-breaking round. When Jackie, Tohru, and Jade near the finish line, Drago appears, manages to obtain the Water Demon chi, and creates a tidal wave to attack Jackie. Uncle reappears on a speedboat after tying up the driver, who was supposed to bring Uncle back to the mainland. Uncle removes the Water Demon chi from Drago and explains that he cannot remove the Fire Demon chi because it is bound too closely to Drago. Drago breaks out of Section 13 on a mission to absorb the demon chi that is held in the original artifacts used to defeat the demons so many years ago. He finds the Enforcers at a petting zoo and transforms them into dragon-human hybrids. Drago locates the fan that holds the chi of the Wind Demon.