This episode is one of fandom's favourites. For a while I wondered why. Now, I know why. It is just the third episode of season one. Xena and Gabrielle haven't known each other for very long. They haven't been travelling together for very long. Gabrielle is still very innocent, and fool enough to think that a hero's life is something to admire. And still, Xena and Gabrielle already have a very strong bond! They can find each other in their dreams! Their dream passages overlap: this is an early sign for what later on will be revealed to us: Xena and Gabrielle are strongly connected to each other: they are soulmates.
In this episode, we get to meet dark Xena, and we get to see how Xena struggles with her dark past and her guilt. And how, in spite of all that, she keeps focusing on her main aim: get through her dream passage in order to help Gabrielle. This is the first episode of many in which Xena risks her life to save Gabrielle's.
We also learn how important it is for Xena that Gabrielle keeps her blood innocence: Xena has found, in Gabrielle, something pure and good that is worth fighting for (and, specially, something worth living for). Gabrielle's goodness is what keeps Xena going on. She cannot lose that.