This is the strangest episode of all, one that suggests that there are more things in heaven and Earth than Tod Stiles has dreamt of. He and Linc are working at a "Sea World" type of place complete with mermaids. One day a mermaid, (Diane Baker), shows up who seems to have an unlimited capacity for breathing and swimming underwater. She talks strangely, as if she's seeing things she's never seen before, suggesting that she actually lives in the ocean. The down to earth Todd is fascinated by her but assumes she's just using this as ruse to get a job at the place. The more open-minded and thoughtful LInc thinks she may be the real deal.
It's an interesting turn-around from the old days of Todd and Buz where Todd was the dreamer and Buz the more down-to-earth guy. The only other episode I can think of that wasn't firmly grounded in reality was the season one finale, "Incident on a Bridge", where it's suggested that Divorovoi and Anna have climbed into the sky. Here Baker, having failed to convince Tod of what she is, jumps into the sea and disappears. Tod wants to get a boat and search for her. Linc says not to bother: she's back where she belongs. Before leaving, she describes Tod's world as "The Cruelest Sea at All".
Despite the downer ending, this is a rather light, dreamy episode amid a run of dramatically over-wrought stories so it's welcome for that reason. But it also suggests the writers were running out of conventional ideas and having to think outside the box of reality to come up with something.