The film opens showing scenes from the first film including Dugu Wu
Di of the Invincible Clan in his fight against Yun Fei Yang where Dugu
believes he has killed Yun Fei and decides to go into a two year period
of extreme isolation to train for his final mastery of the Fatal Skill.
Yun Fei has actually found the hidden step to mastering Wudang’s
Silkworm skill in defeat and saved the Wudang from a hidden poison
within before leaving them and going into seclusion with his lover.
During the period where both are absent a new threat emerges as the Ega
Clan-a group of martial arts practitioners of the Phantom Skill from
Japan- have invaded China to prove their skills are the best in the
world lead by Mochitsuki Soryu Han. At this point
Dugu returns from his training to discover the events that befell Wudang
since he secluded himself to attain the tenth level of his skill. When
he hears that Yun Fei still lives and has mastered the Silkworm skill he
leaves to challenge him as he already had presented a challenge for
that year in the previous film though when he arrives in force at the
Wudang temple he finds Yun Fei is gone. The other practitioners at the
Wudang temple persuade Dugu to wait seven days while they get Yun Fei
back and Dugu agrees though he stipulates if Yun Fei does not return he
will kill all in the temple instead and forbids anyone to leave. The
Wudang then dispatch Yao Feng to track down Yun Fei so that he might
avert disaster despite the edict.