Set during Christmas 1988, Lol is haunted by the devastating events that took place two and a half years before. She and Woody both find themselves struggling to cope with their lives without each other after he leaves the gang. Lol is carrying the burden of her guilt, whilst Woody is trying to build a domestic life with a new girlfriend and a potential promotion at work. Shaun has started drama college and, although still in a relationship with Smell, he has grown close to a girl performing in his Christmas play.

On a special inner city street, the inhabitants—human and muppet—teach preschoolers basic educational and social concepts using comedy, cartoons, games, and songs.

A former professional baseball player, along with his preteen daughter, moves into New York advertising executive Angela Bower's house to be both a housekeeper and a father figure to her young son. Tony 's laid-back personality contrasts with Angela's type-A behavior.