As my SO is fond of saying, there's only enough blood in a young man's body to run one head...or the other.:)
There's another dropped thread in the narrative that runs between "Peter" and this episode, and one that I hope will resurface this season: the gap between Olivia being key to Walter's rudimentary plan to return Peter to the redverse, and whatever happened to disrupt the program and cause both Walter AND Olivia to forget. In "Peter," as told by Walter, he couldn't bring himself to save and then surrender this little boy so like his own. In "Subject 13," Peter's recovered but is so demonstrably distressed by the weirdnesses he's noticing that he's losing it; Walter and Elizabeth are lying to him, yes, but out of necessity: they care for this child, and they want to keep him alive (and sane!) long enough to get him home as they've realized they must.
But figuring out how to do that puts Walter in another moral quandary: he wants Olivia to act as Peter's inter-universe transport, but he's discovered that it works best when she's frightened and upset. He toys with the idea of letting evil stepdad continue smacking her around unchecked--it's Elizabeth, again, who calls him on that. At the end of the episode, Walter warns Evil Step (though I imagine that backfired horribly), and to Olivia, he suggests that they try something new, tomorrow. So my question is, what happened "tomorrow"? Or very soon thereafter? I think it must be some combo of Evil Step yanking Olivia out of the program for spite, and/or her home situation worsening until she shot the bastard and was...in some kind of legal limbo? packed off to boarding school as a third-grade would-be murderer? And then...both she AND Walter forgot all this?
Fascinating...to me, anyway. :)