Leper's "Christmas location" turns out to mean his home in Vermont. Gene takes a train there. Gene comments that this late-night train trip was the first of many he would take across the country that year shuttling among army bases, which was the extent of his military service during the War.
Gene's flashback reveals that he did indeed enlist and join the war effort. It's also foreshadowing, linking the war and enlistment to whatever happens at Leper's house.
Gene hopes that when Leper said in his letter that he had escaped he meant that he had escaped from spies, not deserted the army. But when he arrives he quickly learns that Leper did desert in order to avoid facing a Section Eight discharge, which the army gives to the insane. Leper felt that it he received such a discharge he would never be able to live a normal life.
Leper entered the war with only an idealistic sense of what it would be like. The reality, it now seems, might have driven him insane. Leper's fear about returning to civilian life represents all soldiers' fears and troubles returning to society after war.
Leper then starts claiming that "they" have brainwashed Gene. When Gene resists this idea, Leper says that he always knew but now can admit it to himself: Gene was a good guy on the outside, but a "savage underneath." Leper says he knows Gene pushed Finny out of the tree. Gene, furious, kicks over Leper's chair.
The army has made Leper grow up, though in the process it damaged him: he can admit painful things to himself now, though they make him crazy. He can see Gene's savagery now, while Finny still refuses to.
Leper's mother rushes in to investigate the noise. Gene tries to excuse himself, but Leper invites him to lunch and Gene stays out of guilt. He then goes for a walk with Leper afterward.
Leper's mother's intervention underscores how young the boys still are.
During the walk, Gene comments that Brinker has changed a great deal, becoming much less cruel. Leper responds that he'd recognize the "bastard" even if he turned into Snow White, but the image of Brinker's head having the face of Snow White sends Leper into a sobbing fit. Hallucinations of his corporal's face turning into a woman's, and of more dreadful things, are what caused him to face a Section Eight discharge in the first place.
Leper's insanity is a fear of things transforming, of things changing. It is a fear of growing up. When children look at the world it makes sense. But as they grow into adulthood, their idealism about the world is stripped away, and it ceases to make sense or be beautiful.
Gene begs Leper to stop talking, but Leper either won't or can't. Soon Gene can't bear it any more. He runs away into the snow-covered fields.
Gene, still a child, can't bear to face the horror of war and adulthood, so he runs.