Each of those living at Gull Cottage has their own special Christmas dream thanks to the Captain. In Mrs. Muir's dream the Captain and her confess their love to each other and exchange a kiss.
Carolyn asks Daniel which Christmas was best in all his many years. In response he gives everyone a group dream likened to Charles Dickens' A Christmas Carol, with Claymore as Ebenezer Scrooge and Carolyn as a Bob Crochet/Ebenezer's nephew mashup. Meanwhile, Claymore turns over a baby left in his car to Carolyn.—statmanjeff