The stage immediately follows the events of Battleship Halberd Interior and Battleship Halberd Exterior. The group consisting of Snake, Meta Knight and Lucario fights its way through enemies of the Subspace Army until they reach the Halberd's bridge. Here, Mr. Game & Watch and four Shadow Bug copies are seen piloting the ship. Snake charges and knocks all of them off of the bridge and onto the deck below, disturbing the tea party of Peach, Zelda (was in her Sheik disguise at that time) and Fox. As all Mr. Game & Watches make contact with the deck, they revert to Shadow Bugs, which all merge to form the monstrous machine Duon. Zelda, Peach and Fox get up to fight it, and are joined by Snake and Lucario from the Bridge, while Meta Knight stays on the bridge to fly the ship. A last minute addition to the team is Falco, who ejects from his Arwing to land on the deck.
Once Duon is defeated, the Shadowbugs dissolve to reveal a trophy of Mr. Game & Watch. Fox aims his Blaster at it, but Peach walks past Fox, smiling. She then revives Mr. Game & Watch. The confused 2-D character tries to understand what's going on but remains puzzled. To cheer him up, Peach gives him her parasol to play with, which enthralls Mr. Game & Watch.
Meta Knight proceeds to land the Halberd to meet up with the heroes on the ground and those who evacuated from the Isle of the Ancients on the Falcon Flyer. After the level is completed, Mr. Game & Watch will join the player's team.
- The music for the Duon fight is Boss Battle Song 1.
- This is the only time in which a hero doesn't have its name shown when introduced (Mr. Game & Watch).
- Even in the first playthrough, the player can choose to play as Zelda via Transform, despite the cutscenes picturing Sheik instead.