The second episode opens the very same way the first chapter ended: Our hero is in a perilous situation aboard The Screaming Narwhal, the vessel Guybrush Threepwood and Reginald Van Winslow used to escape the winds of Flotsam Island. A mysterious woman is holding a blade to Guybrush's neck, and she reveals herself to be Morgan LeFlay (Mighty Pirate Hunter™), who was sent by the Marquis de Singe to retrieve Guybrush's pox-infected hand. While idolizing Guybrush to some degree, she's here for the job, and slices Threepwood's hand off straightaway. He'll need to fight her to retrieve his hand and prevent De Singe from getting it.
Once the sword fight breaks out on the bridge of the ship, talk to LeFlay about the details of her daring ship boarding feat, the motivation behind working for De Singe, and the other dialogue options. After a couple of topics, Guybrush and LeFlay will jump down to the deck of the ship, near the cannon. Continue talking to her, and they'll shift to the other side of the deck, near the seagull who is pecking at Threepwood's severed hand. Morgan's grappling hook is stuck in the ship's railing behind the seagull. Grab it, and then talk to her again until they move to the bridge of the ship.
There will be a cable overhead, just out of reach; use the hook on the cable to slide over to the mast. Once there, use the rope that is securing the barrel of fish to the rigging, and Guybrush will slice through it. Talk to LeFlay again until they're back at the bridge (this will take a couple of chats). Use the ship's wheel to shift the Narwhal around, causing the barrel of fish to slide over to the other side of the ship. Talk to her once more until they get to the side of the ship closest to the barrel of fish (it should be the side with the plank and seagull). Use the Seagull on the ship's railing, and it'll fly up to the barrel, causing it to drop and fling LeFlay over the side of the ship by way of the gangplank. Unfortunately, she is able to grab the infected hand before falling into the drink. However, with her out of the way for now, Winslow and Guybrush can make their way to Elaine and ship repair (apparently, Guybrush's fish barrel trick did a number on the main mast). Use the mounted map outside the ship's quarters, and select the Jerkbait Islands.
Guybrush immediately meets the... lovely (?) Anemone, and is directed to the Royal Quarters. He finds Elaine mediating an argument between the Merfolk leader and McGillicutty the pirate; learn as much as possible from them by going through all possible dialogue options. It looks like Guybrush needs to find some artifacts to help guide the way to La Esponja Grande, and he is not alone in this pursuit. Elaine will give him a pass to use the raft down by Anemone, use the pass to travel to Spoon Isle.
Once on the Spoon Isle beaches, Guybrush will encounter two pox-stricken pirates in a conundrum about hiding the Seahorse artifact entrusted to them by McGillicutty. Walk into the jungle and heading West, then North, North again, and West. Of all the surprises, Threepwood meet up with LeChuck! He thinks he has found an artifact, but the Merfolk Key needed to open the altar is broken. Luckily, there is a bait coupon conveniently lying next to him. Pick it up, exit the jungle using that handy button and head back to Spinner Cay.
On the top level of the Cay is the Bait and Repair shop, hosted by the entrepreneurial Anemone. Trade the bait coupon to get an oyster, open up the inventory and examine the oyster it to receive a pearl- the perfect missing piece for LeChuck's key.
Raft back to Spoon Isle, head back to LeChuck (West, North, North, West) and give him the pearl. Talk with him and give him a hint about how to use the items, first by suggesting he uses the Claw Thingy on himself. Just kidding! Then suggest using the pearl on the Claw Thingy, and for him to use the MerKey on the Clamshell lock. LeChuck says Guybrush should use HIS key on the other clamshell; what a smart fellow! Use the keys together, the altar will open, and try your luck (and Guybrush's strength) at loosening the artifact inside. No offense meant, but Guybrush is a bit... scrawny, so why doesn't he pick up the prying tool and give it to LeChuck to try? He succeeds, also nearly killing Guybrush by dropping him off a cliff, but you take the bad with the good. Leave the clearing to reunite with LeChuck, who gives Guybrush the Turtle Artifact. One down, two to go!
Take the raft to Roe Island where Guybrush will discover the abandoned home of Coronado De Cava, the Voodoo Lady's former boyfriend. Poke around a bit, but pay attention to the singing manatee on the wall. Place the locket from the inventory inside the manatee, it spits out a piece of blank paper. Wait, since when is paper REALLY blank?
Go back to Spinner Cay and check out the statue on the way to the Royal Chamber. By check out, I mean poke in the eye. Combine the newly-acquired fish lens with the Eye of the Manatee, and use it to take a look at that blank paper again. 101 Fish Jokes, it says? Might be a good time to take a trip to the Library down by the docks, where Guybrush meets Tetra. Ask if he (...) has the 101 Fish Jokes book, and try not to make a fool of Guybrush in the process. Well, at least he got the book. Take a look inside to find a coupon Threepwood can turn in to Bait and Repair at the upper level of the Cay to receive glowing bait.
It's raft time! Head off to Spoon Isle and head East in the jungle to find the Fishing Well. Care to tempt fate? Combine the glowing bait with an item most likely to make a fishing rod... oh wait, the hook! Guybrush will "fish" around in the well and, in a less-than-graceful pirate maneuver, retrieves the Cranky Fish Artifact. So far, so good.
Time to outwit the lackey pirates at the jungle entrance. Engage in some small talk and suggest a fair way to decide how to hide the artifact, specifically a staring contest. Now, for the tried and true tactics of a Mighty Pirate ™, distract them and slip the pyrite parrot into the chest as they look the opposite direction. The pox pirates hide the chest on another island, and now it's up to Guybrush to go find it.
Onward to Spinner Cay! If the mast is not yet repaired, visit the Bait and Repair shop to get that taken care of. It's polite for Guybrush to ask Winslow's opinion of the mast, then set sail on the Screaming Narwhal! Explore the three tiny islands on the map and listen for the parrot noises, then start digging. (Don't forget Brillig Island, hidden above the Rock of Gelato!)
Success! The artifacts are yours! Now, just to get back to Spinner Cay...
It appears McGillicutty is restless and is attacking the Cay to force them to give up the artifacts! As Guybrush is about to make his escape, Elaine becomes trapped in the rubble. Go help her escape and... do as the woman says. Those hot coals look pretty important; go up to Bait and Repair and pick up the empty bucket. After some wheedling by Guybrush, Anemone lets him take it. Use the bucket to collect the coals, and take the raft to Spoon Isle, and into the jungle headed East then North to meet up with LeChuck... but he looks rather busy. Time to pull some trickery and get those pirates to leave him alone! When in doubt, use a decoy.
Go West into the jungle to see some kind of Merfolk device, like a barbecue. Deposit the coals into the barbecue, but it still isn't hot enough to be useful for anything. Try going back to Spinner Cay and grabbing the dial off the Jacuzzi in the Royal Chamber to turn up the heat. Back at the Barbecue, crank on that dial, and think... what could imitate an ancient relic?
Wave goodbye to the Pyrite Parrot. He has reached the end of his avian career, but his usefulness lives on. Place him on the barbecue, and watch as he becomes a formless vat of metal. Great. Now, take him to the broken altar to mold the metal. But wait, it hardens up too quickly to reach the altar. From the barbecue, go West, North, then West to get to the Cliff's Edge where the Altar used to be. Use the Melted Pyrite on the Cliff's Edge and head back down (going East, South, and then West all the way) to retrieve the pseudo-artifact. Use the prying tool (from the ruins next to Guybrush) and dig it out of there.
Go find LeChuck (East, East, North, North, East, East from the altar) and give him the fake artifact. Enjoy the show, pat yourself on the back for a job well done, and tell him the directions from Elaine, conveniently making Guybrush the hero, of course. As LeChuck provides a distraction, take the raft to the blockade and sail through to confront McGillicutty. Guybrush does what he does best, so insult McGillicutty until he attacks Guybrush's ship, the mast breaks in the turmoil. Unfortunately, McGillicutty's aim is impeccable, and he'll keep breaking the mast unless you find a more hardy replacement. Head off to Brillig Island to check on the wood there... and Guybrush meets up with the pox pirates again! They're confused about where they left the treasure; why not tell them to dig under the tree and unearth it for you? When they're finished, tip the tree over a bit further, then go back to Spinner Cay.
The Bait and Repair shop will help repair the ship, but try suggesting the new kind of wood for the mast. Bingo! As usual, Winslow has a good appraisal of the new mast, then set sail for McGillicutty yet again! This time, things go a bit differently, and the cannonball bounces back and sinks the corsair's vessel.
Return, victorious, to Spinner Cay, and if Guybrush asks politely he'll get the summoning item to continue the quest for La Esponja Grande! Bring it to the edge of the docks by the No Fishing sign, drop it in the water...
...and wait for Episode Three: Lair of the Leviathan!
No real puzzles here; exhaust all dialogue options with Morgan LeFlay to witness the final scene!