Katrina Law brought the heat! The lesbian thing kinda fell flat because Sara really doesn't come off as particularly vulnerable or accessible. Nyssa was totally convincing as an old flame and an assassin, so for me she stole the show. I'm also digging the new conflict between Ollie, his mother, and Felicity. I love how the writers are letting certain protagonists have major character flaws. Ollie is allowed to be an ******* from time to time but considering how they've established his own family, he's really not too bad. I loved the way they choreographed the fighting this ep too. Great sequence between Nyssa and Ollie.
Moving on to the flashbacks... I didn't really care for them. There is nothing between these sisters that really registers as genuine until Laurel goes ballistic on Sara, both because Laurel has turned into a selfish basketcase and Sara is about as remote as if she were still on her own island.
I have to agree that Katie's appearance has suffered because of her weight loss, but it does help sell her downward spiral. I'd like to see her gain 5-10 pounds if she should stick around for season 3.