We see Monkey on his cloud, scouting ahead to see what lies ahead for the pilgrims.

In the middle of some rocky terrain, Sandy, Tripitaka and the horse are resting. The horse is chewing a bit of grass, while Tripitaka meditates and Sandy is cleaning a few leather pouches and accessories. Sandy is disturbing Tripitaka's meditation with some idle chatter, wondering if Pigsy and Monkey have found a feast and forgotten about them. "Meditating again master. …… Not bothering you by talking, am I?" Tripitaka admonishes Sandy for his lack of mental discipline, and tells him to train himself.

Sandy: "Trained for what? To go day after day with sore feet and empty belly, hey?"
Tripitaka: "You can train them too."
Sandy: "Alright, alright, little priest, I can hear your belly too."

A girl dressed in red robes and two bundles of hair appears out of nowhere with two porcelain urns, catching Sandy and Tripitaka by surprise. "Is any of you two gentlemen, by any chance the holy Tripitaka? Sakyamuni Buddha says 'honour the man who is awake and shows you the way' ". She claims that the villagers know that the pilgrims are coming and have sent her to deliver their offerings, some fish and rice. (This is rather strange, as Buddhist monks don't eat fish, and the pilgrims aren't exactly travelling around announced to the entire world). Tripitaka seems interested, and Sandy is very eager, saying "We wouldn't offend you by refusing, would we master?" and lunges forward to accept the food. Monkey however jumps down from the cloud and stops Sandy with his staff.

Monkey: "Wait! - She's not a girl."

Monkey blinks, and sees a tall, slim, male demon, with two long horns, bald except for a bushy red hair in a semicircular area around ear height, with a red sheath and a long sword and a matching red robe, hiding behind the two urns. "Defend yourself, monster", he shouts, attacking despite the objections of Tripitaka and Sandy. He strikes a sequence of blows to the jaw, chest, back neck, throat, between the horns and the demon then rolls over and dies. Tripitaka and Sandy see a girl roll over dead instead.

Through a crystal, we see Sandy and Tripitaka reprimanding Monkey for killing an innocent girl. We see two other demons, who are similar to the Red Demon except that they have a Blue and Yellow coding for their hair and robes. The Yellow Demon is tall and strongly built, while the Blue Demon is short and rather stumpy. They are drinking tea and laughing in a cave. Blue Demon says "Red won't need his share", while Red says "Wickedness can be very boring."

The Red Demon walks into the cave, still in his girl form. The others are surprised that he lived. He tells them not to underestimate Monkey and that he left a false body so that Tripitaka and Sandy would be confused and blame Monkey for doing evil.

Monkey tells Tripitaka that he can't see through an illusion despite being a priest. Monkey pulls out a couple of apples or pears and offers it to Tripitaka, who is fuming. He rejects Monkey and gives him the Headache Sutra. Monkey is unrepentant and says he'll have to prove the girl was a demon, and smashes the two urns with the staff, revealing snakes and scorpions, wrapped in fluorescent green and orange coloured slime. Monkey challenges Tripitaka to believe him.

The pilgrims head off, with Monkey leading the horse, but Sandy and Pigsy are standing in the background and debating, while finishing their lunch. Pigsy runs up to Monkey and accuses Monkey of retrospectively changing the food into reptiles so that he would avoid the Headache Sutra - "Crafty devil, aren't you?" Monkey becomes angry and crushes an apple bare fisted, saying "I had a headache already!!!". Pigsy points a skull on Sandy's necklace and the others seem to agree with him. Monkey says that the others can't manage without him.

Narrator: "What created the demons? A good man may suffer, said The Buddha, until his goodness flowers. The cause of all suffering is desire, and even to desire not to desire, is still to be caught in the wheel. Youthful folly wanted to believe Monkey, but could not."

Back in the cave, the Blue Demon says that is his turn to go. A haggard old lady with a walking stick appears, wandering across the fields, wailing "Where's my daughter?" repeatedly. Sandy and Pigsy conclude that it must have been a real girl that Monkey killed. Monkey charges to the front of the group, and blinks as the old woman collapses to the ground of anguish. He sees the Blue Demon. As the old woman/demon gets up, Monkey charges and rain blows down on the Blue Demon on in pretty much the same sorts of places as the Red Demon, and the old lady drops dead. This time Monkey is continually beating the fake corpse until Sandy and Pigsy physically run up to him and relieve him of his weapon. "Have you gone crazy, animal?" Pigsy asks. Tripitaka punishes him with the headache sutra again, and reminds him of The Buddha's first precept. Monkey pleads his innocence, and goes on to confess that he is a little silly, but it's in his nature to do so, and pleads for Tripitaka not to dismiss him. Sandy says that if Monkey is gone, they can't prove him guilty any more.

We see the three demons in the cave through the crystal ball. They conclude that they have to get Tripitaka to expel Monkey. The Blue Demon asks for more wine, but the servant has an accident and drops the cup and wine. The Blue Demon draws his sword and kills the servant with a blow to the neck. Red Demon taunts him, saying that he is touchy because he got beaten by Monkey. The two demons grapple and threaten to kill each other so that they can assume the other's power. It is clearly an uneasy relationship between these dark demons. Yellow intervenes, saying that he can't let the balance of power be disturbed. Red apologizes - "I’ve been feeling a little off colour." Yellow vows to kill Tripitaka, revealing his origins in the process, "The one who kills the priest, whose nightmares created us, can put on flesh and live full time."

The Yellow Demon walks out of a bush, somersaults in the air and transforms into an old man in grey clothes and grins evilly. The pilgrims continue a trek across some rice fields, spotting an old man praying in front of a shrine in the middle of nowhere. They conclude he is praying for the safe return of his missing wife and daughter and insult Monkey. Monkey charges to the front and blinks, seeing a Yellow Demon get up and approach them with a bow in his hand. Monkey charges forward, shouting " A Yellow One!", and then rolls around in the prone position to avoid being shot, pulls a piece of fur and makes multiple copies of himself. The Yellow Demon is confused, and Monkey lunges forward and knocks his bow out of his hand. Yellow Demon tries to fend Monkey off with a sword, while the others see an old man with a walking stick. Monkey eventually collects him between the horns and he collapses.

Pigsy: "Three in a single day. Is this is a record or some sort of a perversion."
Sandy: "Monkey, you're the monster!"

Tripitaka sends Monkey back to the Land of Fruit and Flowers. Monkey is extremely bitter, shouting "When you get captured, I hope your Buddha will rescue you" and "Well, that's the end. The Great Sage doesn't forgive." Monkey tells Pigsy and Sandy that they must look after Tripitaka and he then flies off back to the Land of Fruit and Flowers. He strolls into the cave and shouts "Look, King Monkey has returned", and is joyfully mobbed by his citizens and led back onto the throne.

The pilgrims are continuing on a mountain road when Pigsy goes on strike complaining of fatigue. Tripitaka tells him that there could be wild animals, robbers or monsters here and that there is a village ahead. Pigsy says it's easy for Tripitaka when he has the horse to ride on. Sandy laments that Monkey is no longer around to kick Pigsy's backside and get him moving. Sandy hears a voice shouting help. He runs after it, and discovers a young child sinking in a boggy marsh. After getting into difficulty, he returns with a stick to fish the child out.

The pilgrims ride on to the next village with the child on the horse. The child's mother is happily reunited with her child, whose name is Swee-Teh. It is revealed that the child is a girl, although it appears to be a boy doing the acting. The pilgrims are served dinner by the lady. Pigsy is eating sumptuously. Tripitaka outlines who they are and what the pilgrimage is about. The lady offers to put them up for as long as they want and offers them a reward for saving her daughter. Tripitaka says they must move on, as there are more souls to save everyday. Pigsy is disappointed. The lady says that her husband will unfortunately not get to meet them. Sandy says "Away is he? What does he do?"

We see the Yellow Demon walk the streets of the village at night. He bends over to do his shoelaces, and is transformed into a man with a sky-blue robe carrying a box of luggage. He rushes into the lady's house, and tells the lady that he didn't do his business trip, as he had a bad feeling. She tells him that she thinks that "you really must love our daughter." The man (Yellow Demon) is begins to panic but his wife reassures him that everything is alright. The Demon actually kneels down in front of the altar and starts to pray, saying that he will reward the rescuer. When his wife reveals that it was "A young Chinese priest and his followers. They won't take the reward; they won't even stay another day." The Demon is startled.

The demon (in human form) is tensely peering through the guest bedroom occupied by the pilgrims. His wife pulls him back into the next room and asks him if he is doing something evil, as he had promised to give it up. The Yellow Demon says that it's Tripitaka's fault for coming, and he couldn't miss a chance like this, telling his wife that he must become powerful, and that she could be the Queen of the whole world. She is horrified and tells him that he should be content with his wife and child. The Yellow Demon reveals that Tripitaka's nightmares created him, and that he became stronger because Tripitaka denied him.

The pilgrims' sleep is disrupted by the lady, who enters with a lantern. The lady tells them to dress quickly and leave so that her husband won't kill them. Tripitaka is perplexed, and asks questions, but decides to hurry on. They are lead out at sunrise. Once they are in the countryside, the lady tells the pilgrims that her husband is the Yellow Demon. Tripitaka feels guilty for sending Monkey away, but Sandy and Pigsy tell Tripitaka that it was the other's idea. Sandy slaps Pigsy, and they start fighting, but Tripitaka reprimands them for their behaviour.

The Yellow Demon is at home eating breakfast, and is greeted by Swee-Teh, who tells him what happened yesterday, and asks him if she can go on business trips with him when she is older. The Yellow Demon is uncomfortable and says "we'll see". He says to Swee-Teh that he hasn't seen his wife around, when his daughter says that she left at dawn. Yellow Demon is told by the servant that his wife left with Tripitaka.

The pilgrims continue after being fare welled by the lady. Pigsy calls her "Your Highness" and tells Sandy that her gracious manner proves that she is a princess. Ten metres after being seen off by the lady, a yellow smoke appears in front of the pilgrims. Yellow Demon materializes.

Pigsy: "Who might you be?"
Yellow Demon: "One of you knows me very well. I've come to take possession of his soul."
Sandy: "You're not getting my soul, you demon!"

A fight erupts. Sandy and Pigsy double up on Yellow Demon, but he fends them off with the additional help of his kicking leg. He slashes Sandy in the stomach and head, and drives Pigsy back and over the ledge into the river. He returns and grabs Tripitaka, who doesn't even try to run away.

Monkey is sitting on the throne in the cave, being served an official meal by his subjects. He is served a cup of wine, but then tips it on the ground. When offered some food, he throws the cup on the ground, and dismisses his subjects. He leaves the cave and goes for a walk above the waterfall, and ponders the meaning of life to himself, wondering why he feels so empty.

Meanwhile, Sandy has made his way back to Yellow Demon's home and he tells the lady what has happened. The lady is shocked because she thought that her husband would leave the pilgrims alone in return for saving their daughter. Sandy replies "No use crying over spilt rice water." The lady tells Sandy that the last avenue of hope of saving Tripitaka is to tell her father. She reveals that her mother was the Queen of the land of White Elephant to the east, and that her father is still King there. Sandy realizes that Pigsy was right about the Princess. She ran away with the Yellow Demon seven years ago and was forced to marry him. It was only after that she was married that she realized that he was a demon, but she didn't tell her father because she had a daughter by a demon. She writes a letter for Sandy to deliver to her father, the king.

We see some grainy external footage of some Indian looking people in a large elephant and military parade. A military officer accompanies Sandy as he enters the royal palace, with a full military welcome. He receives an audience in the palatial courtyard with the King. Sandy first explains what the Princess told him and then gives the King the letter, who asks his attendant to read the letter for him. The King breaks down. He rallies the generals. The first general says that he has a stomach ache and withdraws, while the second says that humans can't fight demons.

Back in the cave, the demons are having a conference. The Yellow Demon is eating a bun while the Red one is eating a Spring Roll. Yellow has been telling the others that he's got Tripitaka safely in his control, and that the others should give up. The other two protest that if Yellow keeps Tripitaka to himself, that they will disappear while he becomes a human. Yellow contemptuously rejects the other two and storms out laughing to himself. Red spits out a mouthful of food and curses Yellow, while Blue whispers to Red of his plan to deceive Yellow.

The Yellow Demon walks into another cave, where Tripitaka is in chains, and gives him two bowls of food and water. Tripitaka refuses, but Yellow threatened to kill Tripitaka if he doesn't submit to him easily enough. Tripitaka wonders if either the demon was created out of his nightmares or if he did something to the Demons in a previous life. The demon becomes angry, and Tripitaka confronts him about his humanization, telling him that if he doesn't try to do good, he may either stay a demon or cease to exist. Yellow Demon loses his temper, saying that Tripitaka is trying to mentally weaken him.

Sandy returns to talk to Monkey above the waterfall on the Kingdom of Fruit and Flowers. Monkey is happy to see Sandy but when Sandy mentions that Tripitaka needs to be rescued he snubs Sandy. Sandy tries to convince Monkey by telling him that Tripitaka knows that Monkey was right and that Tripitaka's a "holy idiot", but Monkey keeps flipping back and forth between his two moods. Eventually Sandy retreats behind Monkey a few yards and they both stand there awkwardly, lost for words.

Yellow Demon re-enters the demons' cave hideout. Sandy has tracked him and spies from behind a rock. Monkey turns up and taps a startled Sandy on the back, noting "nice, - to be needed". Sandy tells him that the demon has just gone inside and they come closer to take a peek inside the cave.

Inside, the Red and Blue Demons ask the Yellow Demon to hand over Tripitaka. Yellow Demon sniggers at them. The other two say that there is every opportunity that it will happen and show him to a pole holding up the cave, unveiling a captured Princess and Swee-Teh. Red puts the sword to the hostages and tells Yellow to hand over Tripitaka, while the demon army (who only have one horn each), disarm Yellow Demon. Yellow Demon leads the demons and the hostages outside. Monkey and Sandy retreat, and conclude that he is leading them to Tripitaka. Yellow Demon has hidden Tripitaka in an adjoining cave 20m away. Blue Demon goes in and drags out Tripitaka, while Red threatens his family when he lingers towards them. Yellow Demon says he wants to take his family and go. The Blue Demon says to be sure, they have to kill all three of them. Yellow Demon protests, saying "My family's got nothing to do with it." Red Demon replies, "He's human. Kill him."

Monkey and Sandy gatecrash the fight and start dispersing the demon army. The Yellow Demon successfully fights a few of the demon soldiers barehanded and seizes one of their swords, then freeing his family with the sword. Swee-Teh is reluctant to go with Yellow Demon and says that neither is her mother. Yellow Demon gets down on his knees and pleads "I love you," but while he is doing this the Red Demon takes a couple of paces forward and cuts him across the neck and then Blue Demon stabs him in the stomach before Monkey and Sandy repel them. Monkey and Sandy continue to pick off the Demon soldiers as Pigsy turns up and joins in as well. Monkey sees Tripitaka and frees him. The Red Demon approaches with two swords and challenges him to single combat. Monkey deftly defends all of Red's artistic advances and is about to land a strike between the horns when Red vanishes. Monkey carefully listens for Red's footsteps and then takes a big swing, hitting the Red Demon between the horns, causing him to materialize, convulse and die. Meanwhile, Pigsy and Sandy have finished off the Blue Demon.

Tripitaka sees Yellow Demon dying on the ground, and rushes to him, saying "You can't die. I've just realized that you're a part of me." Yellow assures Tripitaka that they are separate and that he doesn't mind dying because Tripitaka had shown him the way. He thanks his wife for her love and remarks that a demon had a daughter, and laments that he wasn't quite able to make the transition to humanity. He wants to look at Swee-Teh, but his daughter refuses to accept that he is her father. The Yellow Demon accepts this as his failure and dies. The screen blurs away and we see the human disguise of the Yellow Demon. Swee-Teh realizes that it is her father and she cries with her mother.

Narrator: "There will be other demons on the way. No one is without them. The greatest sage is not without his evil. He has mastered it."

The pilgrims are fare welled by the Princess and Swee-Teh. Tripitaka tells them to return to the King.

Narrator: "Tripitaka never made his mistake again to let his demons imprison him, because he had denied them."You are you're only master," said The Buddha, as even Monkey discovered. To straighten out the crooked, you must first do a more difficult thing. You must straighten yourself."