This is where we first become aware of the monster – or monsters, as the case has it here. We're talking the war (World War II), wars in general, personal wars, hate, jealousy, and fear. Narrator Gene expresses a desire to overcome the fear he once felt at Devon, we can tell that's what the narrative of his youth will explore.
The peaceful, youthful bliss of the summer session constitutes the dream stage. We're aware of the aforementioned "monsters," but when Gene tackles Finny and they "struggle in equality," or when the boys bike joyfully to the beach together, those monsters seem farther away than ever.
It all begins when Gene begins actively competing with Finny. When he fails his test after their return from the beach, he consciously alters their relationship from one of friendship to one of enmity. Matters escalate when he realizes that, not only is Finny a more charismatic, athletic, and likable boy, he's also a better person: he doesn't feel any resentment towards Gene.
Finny's two falls form the bookends for the nightmare stage. How appropriate. In between is all the desolation of the Winter session, including Leper's enlistment and subsequent madness, Brinker's railing on Gene and his fall from the grace of academic leadership roles to the part of rebel, and Finny's relegation to cripple status.
As Gene so eloquently explains in the final chapter of A Separate Peace, everyone feels enmity toward someone or something else. There will always be war, even if those wars are personal rather than military. There is an "ignorance" in the "human heart" that fuels the "monsters" of this novel. And this is true for everyone – except Phineas. Finny may have failed the "thrilling escape from death" bit, but it is he who broke free from the monster(s).