As the entire town of South Park is preparing to hold its annual Civil War reenactment of the (fictional) Battle of Tamarack Hill, the children rehearse as a Union Army rally band. Cartman sabotages the rehearsal repeatedly by taking personal liberties with his drum, missing beats and "rocking and rolling." The rest of the children get angry and decide that he has to be a flautist. Cartman destroys the drum and storms off.
In the morning of the reenactment, Jimbo informs the actors that over 200 people will come to see them reenact the battle, setting a new record. He also takes the time to remind everyone that the primary sponsor of today's event is Jagerminz S'more-flavored Schnapps, "the schnapps with the delightful taste of s'mores." In addition, the special guest will be Stan's grandpa, Marvin Marsh, the oldest reenactor in South Park and "the only man old enough to have actually seen the Civil War... reenactment of 1924." Meanwhile, Cartman returns dressed as General Robert E. Lee, and the boys are outraged by his dressing as a Confederate officer. Apparently under the impression that the reenactment is a competition of some sort, Cartman bets that the South will win the Civil War, and if it does, Stan and Kyle will be his slaves for a month, or vice versa. Believing the outcome will be historical victory for the North as planned, Stan and Kyle eagerly accept the challenge.
At 0900 hours on Tamarack Hill, the reenactment begins. Grandpa Marsh narrates the battle, Jimbo plays as the Confederate general and Randy Marsh is in the role of the Union general. Although the intent of the reenactment is to let the Union soldiers claim Tamarack Hill and the bell thereupon, Cartman, still dressed as Lee, steals the bell and ruins the entire reenactment. The reenactment is then slated to be started over again. As both sides prepare once again, Cartman rallies the now drunken Confederate reenactors to actually win the reenactment, in order to win his bet. Motivated, the Confederates proceed to ruin the reenactment once again by routing the Union soldiers, leaving several injured and dead.
At the after party, the children are very angry at Cartman for cheating and restate that the wager hinges on the victory of the Civil War, and not upon the reenactment. As all of the reenactors, Confederate and Unionist, are now drunk on the Schnapps, Cartman rallies them to attack Topeka, which is presumed by the reenactors to have been the next battle. The next day, Topeka is assaulted by the drunken South Park Confederates and the entire town falls. As the invasion continues town by town, their ranks are continually bolstered by either Confederate supporters or men who would simply choose to avoid getting on their bad side. Regardless, all soon fall under the same perpetually drunken influence of the S'more Shnapps. Back in South Park, Butters delivers a letter to Stan and Kyle from General Cartman Lee, boasting of his success. Horrified, Stan, Kyle, and Grampa Marsh travel to Chattanooga which is under attack by the Confederates. The National Guard also arrives on scene and shoot a warning flare into the air. The flare kills Kenny however, and another letter from Cartman is later sent to his mother.
The National Guard is unwilling to engage the Confederates with so many civilians at risk, so the boys hatch a plan to rid the army of their primary fuel, the S'More Schnapps. The army soon wakes up with raging hangovers and quickly disbands,but Cartman calls the Jägerminz company, who deliver to the entire army a truckload of alcohol. With the men drunk again, the next target of the Confederates is Fort Sumter. Though they easily overrun and secure the fort, they are then faced with the National Guard. The latter is defeated with help from Confederate reinforcements made up of the entire population of South Carolina.
Finally the Confederate Army reaches Washington, D.C.. The army demands the Confederate States of America to be a separate country and blackmail President Clinton by threatening to release a (bluff) video of him with Marisa Tomei. With Cartman's victory at hand, Grampa suddenly realises that the drunken men still think that the entire campaign is a reenactment, so Stan and Kyle dress up as Jefferson Davis and Abraham Lincoln respectively, just in time to prevent President Clinton from signing the surrender. The children re-enact the surrender of the Confederate Army, with the added condition that the South receive a free year's supply of schnapps. The entire army breaks up and leaves upon surrender to Cartman's dismay.
Stan and Kyle are deciding what to make Cartman do, having won the bet, but their triumph is short-lived. Cartman is saved from the terms of the bet after remembering the North still won the war. President Clinton makes this clear by pointing out that the abolition of slavery was one of the significant outcomes of the Civil War, making slavery illegal and the bet nullified. Knowing that they only earned a pyrrhic victory, Stan and Kyle angrily go home after calling Clinton a dick.