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Is Mike really microdosing LSD, and thinks the gnomes are talking? It would be a great twist

I don't think this is a hallucination. The Jellys are very REAL! ;)

yes! And I also want to know why Mike raised an "uninjured" hand. Was his other hand injured, and how? Or was "uninjured" just a descriptor of his hand not necessarily implying the other is injured?

You need to go back a few "episodes". Check out Ouch! to find out what gets injured and there is a link at the end of that episode to the next one that will tell you what did it...

Thank you by the way!

Me too! Blame @mariannewest. She is the secret keeper.