The local historical society wants to erect a statue of local hero Navy Captain Figg. Captain Gregg is insulted that he wasn't chosen and wants Mrs. Muir to expose him as the coward he was. Mrs. Muir says that she must have proof.
Mrs. Muir's Uncle Arnold who sells magic tricks comes for a visit. Candy asks for him to stay and perform at her birthday party until they find his tricks don't work and his stories grow old and stale fast.
Captain Gregg reluctantly consents to removal of the antiques and replacing them with modern furniture to make the cottage a home, but when she has his prized monkey puzzle tree cut down after a window is broken the angry Captain leaves.
Mrs. Muir needs money to fix the plumbing and can't come up with a single idea for an article, so the Captain collaborates with her on a story, but his secret revisions start giving people the wrong idea about her.
Prompted by her family doctor, Carolyn sees a psychiatrist, who convinces her that the Captain is a delusion she should ignore. When the psychiatrist shows up at Gull Cottage, the Captain takes delusion into his own hands.
Carolyn comes down with a bug, and Captain Gregg, dissatisfied with the doctor, concocts his own remedy which sends Mrs. Muir back to the mid-1800's where she is the "ghost" and the very much alive Captain is the only one who can see her.
The Captain is continually interrupted when trying to read Carolyn his poem for her. But her rapt attention to a singer-songwriter stranded at Gull Cottage gives the Captain an idea for getting his poem heard.