Booker tells us that in the anticipation stage, the hero is incomplete or unfulfilled. For Joe, this is the sudden flare-up of his guilty paranoia about the old crime. Joe has been living for years in relative comfort, not forgetting about Steve Deever, but not facing the man's ghost, either. When Ann arrives, things get complicated. Not only is she the daughter of the man Joe put in jail, she's he former fiancée of Larry, the son Kate refuses to pronounce dead. Joe needs to find a way to absorb Ann into the family without admitting his guilt.
The end of Act 1 and the beginning of Act 2 seem to teeter between the dream stage and the frustration stage. As soon as Joe figures out how to deal with one obstacle, a new one crops up. When he finds out George is coming to visit, he comes up with a plan. He will invite Ann and George into the family, and give his disgraced colleague Steve a job when he gets out of prison. He hopes he can finally put the memory of his war profiteering to rest.
Things really get sticky when George arrives. Joe and Kate worry because George, a lawyer, might try to reopen the case. But what George's probing really sets in motion is a battle between Chris and Ann's resolution to marry and Kate's resolution that Larry's still alive. Playing hardball, Kate reveals the truth about Joe's crime.
Prompted by Kate's stubbornness, Ann shows her Larry's last letter. Chris attacks his father's murderous small-mindedness, and Ann insists they take him to jail. This is probably the worst possible outcome for Joe; hence "nightmare stage." Chris reads Larry's letter aloud, and Joe learns that his act caused Larry to commit suicide.
Finally accepting the burden of his guilt, Joe kills himself. Kate, Chris, and Ann are left with the wreckage.