If she's going to be a total bitch to Serena, she needs a new reason, and "once again my Yale dreams are endangered" just doesn't raise the stakes enough, in my opinion. Which gets even hairier in a second, because last year Blair was the one on a singleminded mission to lose her virginity, so by the end of episode she should have learned that something about that was dumb, but she doesn't seem to, beyond telling the little girl that she was in love with Chuck at the time she fucked him, which I do believe but I don't think B would have decided or figured out yet, so it's a little confusing because it comes off like she's lying to the girl and being a hypocrite, which it itself at odds with the explicit moral of her story here, which is that blackmail is only one of a number of options, which should be explored before you start taking people's marriages apart for your own purposes. Oh, and that her mother has fucked up her entire brain, but that's not something that she's going to work out in one episode.
Anyway, fishy. So Serena's all WTF and Blair "explains" crazily that "Little Emma" is "less Holly Hobby and more Jenna Jameson," which doesn't clarify. Serena totally goes, "Can you speak plainly?" Blair explains: "She's determined to become a woman on my watch, and if I don't help pimp her out, she's gonna character-assassinate me to the Dean." Serena's confused, because earlier it was made clear that Emma "liked ice cream ... and magic," which is one of those things Serena says that sounds normal until you think about it -- or how she keeps up this bizarre, rueful mad scientist dialogue with invisible Cecil the Caterpillar this whole episode -- and then you realize that Serena van der Woodsen is vastly weirder than we think.
Blair rolls her eyes at the pictures of Aaron Bobby dressed as Cecil, and totally shits all over the obvious romance Serena is having with the imaginary Caterpillar, which is less out of character, sadly, and keeps screaming: "Focus, Serena! You got me into this! And I'm not losing Yale because of that little tart's libido." Serena shoots an OMG ray out of her forehead and lays it out for Blair, which I love, because there is actually no need to freak out, but... (Okay, actually it does make a little more sense, because Emma's offense is located right in the middle of Blair's blindspot: how do you control through fear when the person has no fear in them? Little Emma has a clearly defined goal, means to accomplish it, and the upper hand. Of none of these things has Blair any experience being on the receiving end, so this is like Hurricane Emma. I can buy that.)