The Governess and Mrs. Grose attempt to keep their heads on straight and not get carried away with extravagant ideas – but it's tough to stay calm when you're dealing with evil spirits.
The two women meet that evening after everyone's asleep to rehash the mysterious sightings, and they confirm that indeed it was Quint and Miss Jessel that the Governess saw.
The Governess herself isn't worried about any danger she might be in from the ghosts; instead, she's just worried about the possibility that they might have corrupted the children.
Speaking of the children…immediately after seeing the ghosts, the Governess returns to her two pupils. Again, she's taken in by their beauty and innocence, and doubts her new theory – can it possibly be true that something as pure and wonderful as Flora could lie?
The governess then goes back through the events of the day, wondering if perhaps she's just imagined Flora's complicity.
In this review of the sighting, she sees only further proof of Flora's deception, but still doesn't want to believe it; needing to know more about the children, she pumps Mrs. Grose for more information, especially about the housekeeper's earlier assertion that Miles is naughty at times.
The housekeeper admits that Miles has been bad once to her knowledge; before Quint died, the boy and the valet were apparently together all the time. Mrs. Grose, finding this inappropriate, approached Miss Jessel to complain. The former governess got a little snooty with her, and basically said that it was none of her business. Not to be deterred, Mrs. Grose reminded Miles that he should remember his position in life (as a young gentleman – as opposed to Quint, who was merely a servant). The response she got was not a good one.
The horrifying thing that Miles did was basically what the Governess fears Flora did with Miss Jessel's ghost – he simply denied that he'd been hanging out with Quint.
Mrs. Grose was appalled at his denial, and feared what Quint was doing with the boy. However, Miss Jessel approved of their relationship, and refused to do anything about it.
The Governess wonders aloud whether or not Miles knew about the racy relationship between Miss Jessel and Peter Quint, and suspects that he knew all along and was concealing it.
The two ladies wonder once again what Miles could have done at school to deserve being sent away forever.
The Governess rightly guesses that, when Mrs. Grose reminded Miles that Quint was just a servant, he reminded her that she was the same – that's a way harsh thing to say, but of course she forgave him…people are always forgiving Miles for things.
The picture of the past grows even more dismal; apparently, when Quint was with Miles, exerting his influence upon the boy, Miss Jessel was with Flora. This only confirms the Governess's worst fears that both of the children were in cahoots with their villainous elders.
The Governess nobly (and self-consciously) tells Mrs. Grose that she's not accusing anyone of anything yet – she just has to be on the lookout from now on.