The episode ends casting a strong shadow of suspicion on Dr. Jacoby (who looks like he may have been the world's first true hipster). Jacoby is shown listening to a recording from Laura while in a bizarrely beach-decorated room in his signature wacky clothes (but not his prescription red and blue 3D glasses) while casually snacking. He opens up a hinged coconut to reveal the heart necklace that Donna and James had buried towards the end of the pilot. The pilot ended with a gloved hand digging up the necklace to a backdrop of eerie "this-is-the-hand-of-the-killer" music and this episode ends with Dr. Jacoby in possession of that very necklace.
But he may not be the killer after all, even in this most damning position, because Laura starts telling him about a "mystery man" in her recording, whom she seems to be legitimately afraid of. He puts on his headphones and cuts off the sound from viewers right as she starts shakily talking about this mystery man. It is only then that Jacoby is shown to have the necklace, and he starts to sob for Laura. Viewers are deliberately manipulated into suspecting both Dr. Jacoby, who is weird and creepy and has the damned necklace, and the mystery man whom the victim herself is confiding to Dr. Jacoby about.
The episode is aptly titled "Traces to Nowhere," as it leads down a series of false trails and dead ends, leaving us with questions rather than answers. But the signature charm of the series makes it so that such a conclusion isn't so much frustrating as it is captivating.
Bottom Line: At this point in the story there's little forward action, much talking and a slight progression of several different story lines. I believe the intent of David Lynch and Mark Frost at this point was not to move the audience forward through their story, but rather to draw the audience deeper into their world, and this episode worked very well in that regard.
Recommendation: While there are better episodes to come, this one can't really be skipped without viewers losing track of certain key elements. Bear in mind that this is still an introductory phase of the series, however there are many good moments here (and many more to come).
Kevin Mooseles knows (but won't tell yet) who killed Laura Palmer. He enjoys a damn fine cup of coffee, and has been craving doughnuts every day since he started watching Twin Peaks.