The dishonorable lover of Doña Rodriguez’s daughter, whom Don Quixote intends to fight, has fled the country. The Duke orders the lover’s footman, Tosilos, to take his place in the duel against Don Quixote. Meanwhile, as Sancho and Dapple head toward the castle, they encounter a group of German pilgrims along with Sancho’s old neighbor, Ricote the Moor, who left Spain when the king exiled the Moors. Ricote, who is on his way home to dig up some treasure he buried there, complains about his separation from his family during his exile. Sancho tells Ricote about his governorship, and Ricote asks what Sancho gained from his term in government. Sancho answers that he learned that he cannot govern anything but a herd of cattle.
After leaving Ricote, Sancho and Dapple fall into a pit from which they cannot escape. Don Quixote finds them and gets others to help them out. Don Quixote and Sancho head back to the castle, where Sancho tells the Duke and Duchess about the end of his governorship. The Duke says he is grieved that Sancho has left his post as governor so soon but says that he will find Sancho a better position at the castle. The Duchess says she will have someone care for Sancho’s badly bruised body.
On the day of the duel, the Duke removes the steel tips from the lances so neither of the combatants will be killed and takes several other measures to ensure a harmless fight. When Tosilos sees Doña Rodriguez’s daughter, however, he falls in love and refuses to charge Don Quixote. Instead, he proposes to the daughter. Thinking that he is the farmer’s son, she accepts but soon discovers the trick. Don Quixote assures the Duke that this transformation is nothing but the work of an evil enchanter, but the Duke, knowing the truth, locks up Tosilos.
Don Quixote and Sancho bid the Duke and Duchess farewell and Sancho happily receives Teresa’s letters from the Duchess. As the pair starts to leave, however, Altisidora, pretending to be crushed that Don Quixote does not love her, utters a curse, in sonnet form, against him. She berates his cruelty to her and accuses him of stealing three handkerchiefs and a garter. But when the Duke questions her, she admits that she has the garter.
On the road, Don Quixote and Sancho encounter some workmen carrying icons of saints to a nearby church. Don Quixote greatly admires the icons. In a wood beside the road, Don Quixote becomes entangled in some bird snares, which he mistakes for an evil enchantment. The two shepherdesses who set the snares appear and invite Don Quixote and Sancho to the new pastoral paradise they and others from their village are trying to create. Don Quixote declines the invitation but is very impressed. He vows to stand in the middle of the highway for two days, forcing everyone who passes to admit that these two shepherdesses are the most beautiful maids in the world after Dulcinea. Shortly after Don Quixote takes up his position on the road, however, a herd of bulls comes down the road. The herdsmen warn Don Quixote to step aside, but Don Quixote, Sancho, Rocinante, and Dapple are crushed.
Don Quixote and Sancho stop at an inn, which Don Quixote, for once, does not mistake for a castle. Eating supper, they encounter two gentlemen who have read the counterfeit sequel to the First Part of Don Qui-xote. Don Quixote exposes the book as a fake and the men criticize the book vehemently. Don Quixote also refuses to read the book, not wanting to give its author cause to gloat that people are reading it. When the two men tell Don Quixote that the false Don Quixote also traveled to Saragossa for a jousting competition, Don Quixote determines that he will never set foot in that town but will go to Barcelona instead.
In your analysis of the second part of Don Quixote, you write: "The story of Anna Felix and Don Gregorio tempers Cervantes’s otherwise rampant racism" - Really? This is a masterpiece that has survived the centuries because of it's jawdroppingly brilliant use of irony, but you can't seem to notice the difference between the first narrator (Cide Hamete's translator) and Cervantes himself!
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Any analysis of Don Quixote that doesn't mention the fact that that book is, at the core, a meditation on individual liberty, monetary debasement and the moral horror of involuntary slavery, is incomplete. See the work of Eric C. Graf of Universidad Francisco Marroquín. His article-
Juan de Mariana and the Modern American Politics of Money: Salamanca, Cervantes, Jefferson, and the Austrian School