Okay, fine. I admit. This is probably the best episode of the whole season.
"Sleepless in Ponyville" is, hands-down, the single most beloved episode of S3. At first, I didn't understand why. When it aired, I felt almost underwhelmed. Yet, now that I've watched it again... yeah, I'll have to agree with the consensus. This episode is fantastic. It's got some sweet character bonding, brilliant writing for Scootaloo, a fair deal of laughs, rich, dark scenery, and a notable second appearance from Princess Luna. It's hard to ask for much more than this.
Let's start with Scootaloo. At long last, some personal character development has taken place for one of the CMC members, justifying their place amongst the main characters. Scootaloo here has the fear of being rejected by someone she looks up to, and thus feels she has to hide her fears and concerns. This is arguably one of the best character conflicts the show has ever had, because it's easy to relate to yet also provides in-universe depth for the character. Scootaloo's personality is worked around here, addressing the youth and insecurity that lies underneath her tough exterior. It's a near-perfect bit of character work, and one of the best examples of what makes the show's characterization work.
There's plenty of laughs to be had here, with a number of charming and clever little gags sprinkled about. But this episode also brings out the spooks, and while the nightmare sequences are fairly light, they still have a wonderfully twisted design. Warped trees like the forests of the show's pilot, a rich selection of colours, and the ever-hidden, ever-pursuing Headless Horse make these nightmare scenes spectacular. Princess Luna makes her second major appearance here, setting off what an apparent subplot continued in S4. Her knowledge of dreams and nightmares comes into play, but in general it's just great to see her again.
Of course the sisterly bond between Applejack and Apple Bloom is apparent, but we also see how Rarity and Sweetie Belle's relationship has grown since "Sisterhooves Social". Rarity letting go of some of her reservations and making some (small) sacrifices for Sweetie Belle are delightful to watch, and there's some wonderful moments between the two. At the end, we see a similar relationship budding between Scootaloo and Rainbow Dash, and it's just as sweet.
Said final scene, with Scootaloo and Rainbow Dash bonding, shows yet again Rainbow Dash's huge leaps in maturity since the start of the show. At the beginning, she'd be reluctant to admit her fears, and indeed in S1 she faced situations not entirely unlike Scootaloo's. Now she's willing to admit that she's scared to Scootaloo, though she might deny it to others. It seems like a small step, but it's still yet another in a long series of displays of maturity from Dash.
This episode is truly great. Watching it again, I pick up on its countless great qualities, and it has a lot of them. It's the most beloved episode of the season for a reason, and at least at this point I'm inclined to name it the best of the lot. It's simply a fantastic episode.