While all other souls perish at the carnival, John manages to redeem himself and the Devil sends him to Heaven. Realizing that the Devil's Carnival can now redeem people's souls, the Devil intends to put Heaven out of business by helping people find redemption (thus having people look to Hell for salvation).
In this musical rock-opera, we open with god (cameo by Paul Sorvino), portrayed as a puppet-maker, painting a wooden doll. When he makes a mistake on one, he dismissively throws it into the rubbish bin.
We then cut to the story of three people on the cusp of death. John (Sean Patrick Flanery) has locked himself in the bathroom and slit his wrists while his wife screams outside the door, trying to get in. Tamara (Jessica Lowndes) is barricaded in a car as her boyfriend pleads for her to say. Unfortunately for her, he pulls out her gun when she decides not to drive off. Finally, we see Ms. Merrywood (Briana Evigan) flee to her trailer, hotly pursued by the cops. They have followed her after she stole some valuables, and she appears to ready herself for a fight. All three are then sucked down to Hell, to the Devil's Carnival, where the Devil has assigned his minions to test the newcomers.
We then follow each of the soul's travels through the carnival, as the Devil (Terrance Zdunich) reads slightly modified editions of Aesop's Fables that accompany each of the soul's tales.
- Ms. Merrywood happens upon a pile of jewels and clothes with a sign that says "take only what you need," with Merrywood saying she needs it all. She also finds a map that will lead her to a giant diamond. When she reaches the diamond, she imagines herself in possession of it. To win the diamond, she must win an impossible game of flipping a coin into a tiny slot. Each time she misses, the Devil's minions strip her of some of the wealth she has already accrued. She is eventually stripped naked, and still tries for the diamond. With nothing left to give, Merrywood loses her soul and is subjected to torture. This is accompanied by the Aesop fable "the dog and his reflection," where a dog carrying pennies in its mouth sees its reflection in the water and wants the pennies in its reflection. The dog ends up dropping its own pennies in the water when it opens its mouth to bark at its reflection, and drowns when it dives in the water to retrieve them. The dog (and Merrywood) perish from their greed.
- Tamara is wandering the carnival when she finds a handsome demonic man named "Scorpion" stuck in a cage. Despite his dangerous name and being caged, she frees him and he woos her. He tells her to wait in a hiding spot and that he'll be back, but she follows him . Eventually, she finds him making out with another woman. She turns to leave, but he convinces her to stay and play in his carnival game. Against her better judgment (as with her earthly boyfriend) she trusts him and is strapped to a spinning wheel. Scorpion throws knives at the wheel, with one hitting her directly in the chest as Scorpion laughs at her fate. This is accompanied by the Aesop fable "the scorpion and the frog" where a frog falls in love with a scorpion and promises to carry it across the lake. The scorpion notes that if it stings the frog, it too will drown when the frog dies. The frog is carrying the scorpion and is fatally stung. As it drowns, the frog asks why the scorpion doomed them both, and the scorpion replies that stinging is its nature. The frog (and Tamara) perish from their misplaced trust.
- Paul was suicidal because he lost his son while on a train. The Devil's minions torture Paul by pretending to be his little boy, who he can never get back. Paul committed suicide because he could not overcome his grief over losing his son. Paul makes his way to the Devil himself, who tells Paul that his boy is forever lost. This is accompanied by the Aesop fable "grief and its due." In the fable, the king of the greek gods offers powers to all of the other gods, but when grief arrives last, the king has nothing left to give but people's tears. Accordingly, grief breeds pain and pain leads to more tears (and Paul's suicide will only bring more pain to his wife). Unlike the others though, Paul is able to accept that he will never find his son and states that he no longer wants to grieve. The Devil is surprised at this and, with his soul now redeemed, the Devil sends Paul up to Heaven (much to god's surprise and seeming displeasure).
The film ends with the Devil saying the rules have changed and that his carnival, instead of punishing and dooming its souls to repeating the same sins, can actually help people overcome their evil ways and redeem themselves. The Devil changes the way the Carnival is operated to maximize such results, stating that this will be his new war on Heaven. Now, people will turn to Hell for redemption, rather than to Heaven.