After being ripped off by the Camelot Fair (the knight is shorter than he looks, the wizard is just a cleaning product salesman, and the dragon is only a dog wearing a dragon mask that it's scared of) Timmy wishes he was in the real Camelot, but Timmy's parents somehow come along with him and are about to be eaten by a dragon!
The 595th Annual Dimmsdale is underway. Timmy is there with his fairies and is excited about seeing how people lived in the Middle Ages (Cosmo confuses Timmy's meaning for "middle aged" and poofs into an old, balding man). Timmy wishes for the best knight costume ever. He is poofed into a shining armor, with Cosmo as his shield and Wanda as his horse. As he rides around the fair, Timmy quickly finds the place to be a disappointing rip off. One of the knights at the fair is really a short man standing on a ladder, who Timmy mockingly calls "Sir Lancealittle". Timmy runs into a wizard, who turns out to be a salesman who was peddling cleaning products. Timmy rides into a nearby tent where a dragon is on display, but it turns out to be a dog in an over-sized mask. The dog whimpers and runs off after it falls out of the mask and sees the scary dragon face. Timmy is disappointed at the fair, but his parents seem to like it but that is because they confused it for the State Fair. Timmy rides off and wishes that he was in the real Middle Ages.
Timmy is poofed back to the 15th century. He runs into Sir Finkleburg, a pompous knight in gold armor, riding on a black stallion. The knight treads over Timmy and his fairies when they get in his way. Mr. and Mrs. Turner, still dressed in a two person cow suit from earlier, have been wished here was well because Timmy accidentally wished everyone from the fair to wind up in 15th century England. This creates a problem when Timmy's parents are scooped up by a menacing dragon. Timmy needs to find a weapon and fast. He spots Sir Finkleburg trying to pull a sword from a stone in front of a crowd, but Sir Finkleburg fractures his arm in the process and so he does not succeed in pulling the sword out. The court jester awards the knight with a consolation prize for his efforts, a miniature sword in the stone home game. Sir Finkleburg then fractures his finger while playing with the game. The court jester then introduces King Arthur Liebowitz and his uncle Merlin the Magician. King Arthur is a little boy who has very bad vision, while his uncle Merlin wants him to pull the sword from the stone only so that they can sell it and get enough money to move away from their dirty kingdom. Before little Arthur can reach the sword, however, Timmy rides in and quickly snatches it, giving a hasty explanation to the others why he is taking it before riding off to fight the dragon that stole his parents.
The people declare Timmy their new king, but they do not know his name. Merlin tells them it is Arthur because he wants his nephew to be king so they will be rich. Meanwhile, Timmy stops to rest on a bush when he sits on the Holy Grail. The people of the kingdom see this, and Sir Finkleburg declares that Timmy is even more of a king than he was five minutes ago, Merlin sees this and is starting to become frustrated with Timmy's success, so he tells Arthur that he must slay the dragon himself to become king. Merlin cannot help Arthur slay the dragon because they are impervious to magic. Cosmo and Wanda tell Timmy this as well when he shows up at the dragon's lair. The dragon has been feasting on cows, which Mr. and Mrs. Turner believe is some sort of state fair amusement ride, even as the dragon lifts them up and gives them third degree burns. Timmy runs in to save his parents, he throws the sword at the dragon which slices through the cow suit his parents were still inside of, causing them to fall to the ground. The sword returns to Timmy's hands because it has special properties. Arthur wanders into the fight, he cannot see anything, so Timmy grabs a pair of glasses his Dad was wearing and gives them to Arthur.
When Arthur puts the glasses on, his voice becomes deep and he becomes ridiculously muscular and much bigger than he was before. The newly transformed King Arthur rips off his shirt and grabs the sword, and charges at the dragon. Timmy exits the cave as the melee from the battle can be heard in the background. Cosmo and Wanda ask what happen, Timmy says that Arthur is going to kick the dragon's butt. A skeleton of a human with glasses and the sword Timmy gave to Arthur flies out of the cave and lands at their feet. Cosmo and Wanda bring King Arthur back to life, who rushes back into the cave and manages to slay the dragon. The people of the kingdom cheer, Sir Finkleburg's arm pops off when he lifts it up to cheer and the people around him quickly eat it as food. Arthur is then officially made king, when his sleazy uncle Merlin suddenly tries to congratulate him. King Arthur stares at Timmy who nods, and then Arthur throws Merlin off the cliff. He lands in front of the hungry townspeople, who declare "Oh boy! Seconds!" and pounce on him. The frame freezes on Merlin's last moments, and it zooms out to reveal Timmy was reading the story to his parents, who cannot read it themselves because their hands are bandaged from being burnt earlier by the dragon (though they don't remember what happened which might have been because of Timmy wiping their memories of the events). Just then, Merlin suddenly appears with Cosmo and Wanda in their fish bowl as a goldfish, telling them it's his "new gig", shocking the two.