Merle is back and isn't he a breath of fresh air. This episode was a meeting of this seasons bad guys and it was great fun. Merle is his usual self, but written a bit better than first season. He obviously has a bone to pick with Rick's crew, or rather he wants to give him his new metal hand point first. He was the best surprise of this episode and will create a lot of tension between Rick's prison and the Govenor's Woodbury.
Now the Govenor is a piece of work. Outwardly he's smooth. So smooth. Sure he's a tyrant but he papers it over with enough sentiment that the 78 scared people buy the bullshit eagerly. In the dark you gravitate to the light even if it's a fuse. Inwardly the Govenor is obviously a bag of crazy. His sanctum is a room full of aquariums filled with walker heads. He kills without remorse and really he kills the soldiers not just for their loot but because he knew he could not control them. That's his watch spring. Control.
So, now we are having fun. Rick's crew is cleaning up the prison which is much easier to defend than Woodbury. So eventually we'll have a classic seige situation where the fort with less forces has to defend against a larger well armed force. The key will be the Govenor's ability to control his new captive (though she doesn't know it yet) Andrea. Will the new cold blooded Rick let her die? Will Michonne get her sword back and do some dicing and slicing?
As the great Willy Wonka said, "The suspense is terrible, I hope it lasts."