Arthur is bumming because Little Dorrit is staying in her room and won't come out and play as often as she used to. Also, he's a little worried about Pancks and his Dorrit family research. Cross fingers and hope for the best!
Coming home from the Marshalsea one night, Arthur finds Meagles in his room, freaking out.
Turns out Tattycoram finally snapped, gave the Meagleses a piece of her mind, and ran off. The piece of her mind basically accused them of being horrible, horrible people, constantly doting on Pet in front of Tattycoram's face. Also, Tattycoram is just generally depressed by the fact that she easily could have been in Pet's place, and that life is such a random lottery.
Meagles can't find her, and he and Arthur decide to seek out Miss Wade – maybe Tattycoram is with her.
They search up and down in a forgotten corner of London and finally find the place she's renting.
Miss Wade is exactly the same as before: "just as handsome, just as scornful, just as repressed" (1.27.54). She has Tattycoram with her and has clearly taken her side.
Miss Wade offers Tattycoram (whom she is calling Harriet) the option to "be, again, a foil to his pretty daughter, a slave to her pleasant willfulness, and a toy in the house showing the goodness of the family. You can have your droll name again, playfully pointing you out and setting you apart, as it is right that you should be pointed out and set apart. (Your birth, you know; you must not forget your birth.) You can again be shown to this gentleman's daughter, Harriet, and kept before her, as a living reminder of her own superiority and her gracious condescension" (1.27.71).
Meagles is totally floored by this perspective on what he and his wife have done with Tattycoram.
He busts out with some vague pleas to Miss Wade to let Tattycoram go.
Then he accuses her of something. Maybe of being a lesbian? Maybe of being some kind of sadomasochist? It's really hard to tell, but here it is: "If it should happen that you are a woman, who, from whatever cause, has a perverted delight in making a sister-woman as wretched as she is (I am old enough to have heard of such), I warn her against you, and I warn you against yourself" (1.27.83). Huh. Well, you decide what he's talking about. Although it really does sounds like he's suspecting homosexuality.
In any case, Tattycoram is all, "um, no, I'm not going back to that," and stomps off.
Miss Wade then tells Arthur and Meagles that she is also, like Tattycoram, illegitimate. Finally, she tells Arthur that she hopes Pet and Gowan are happy together. But she says it with a lot of spite, so she probably doesn't mean it.