After an incident involving a haunted house, it is discovered that Shaggy has a special condition, and the doctor forbids him from going on anymore mystery solving shenanigans. So the gang heads off to La Serena Spa, so that Shaggy can relax, and so that Fred can get the extra credit he needs in his science class by participating in a paleontological dig. While Fred, Daphne and Velma head off to the dig, Shaggy and Scooby catch up with their digestion after pigging out at a barbecue. However, on their way over, Scooby comes across a giant dinosaur that disappears after he runs away from it. Disregarding that, they continue on to the dig.
When they arrive, they meet Professor Svankmajer and her student, Winsor, who show them the rest of the dig. However, just before they leave, they come across the dinosaur that Scooby saw earlier. They narrowly escape an attack, and they head back to the spa, where Shaggy is hypnotized into being brave to overcome his medical condition. Unfortunately, their host, Mr. Hubley, can't remember the keyword that triggers Shaggy's bravery (bad), so Shaggy's still the same when it comes to frights.
Scooby and Shaggy later go to a local diner to eat, and accidentally disturb a gang of rabid bikers. Unfortunately for them, they use the keyword while talking to Shaggy, which causes him to beat the tar out of every biker in the restaraunt. When he's done, another biker, Tex, who stopped on the way over for ice-cream shows up and challenges Shaggy to a motorcycle race tomorrow night. Still brave, Shaggy accepts. When Tex leaves, he snaps back to normal, knowing what he just did.
Daphne tries giving Shaggy some motorcycle lessons, but Shaggy proves un-teachable to disastrous results. Nevertheless, the race is held that evening, but before they start, Shaggy hears the keyword “bad”, which triggers his bravery, and causes him to outrace Tex, saving his life in the process. Unfortunately, at the finish line, there is a Phantosaur attack, and Shaggy, upon thinking the word "bad", turns back to normal and gets chased by the dinosaur. Eventually, the culprits are unmasked, and as it turns out, the dinosaur was a robot being controlled by a few engineers working at the dig. All is well, and the gang can return to their vacation undisturbed.
When they return to the spa, Mr. Hubbley informs them that his hypnotism equipment has been stolen, and while investigating, the gang is attacked by a group of Velociraptors, who come too close to eating the gang alive before running away to the city to cause havoc with their leader, a fiery version of the Phantosaur, who’s completely made of flames, and can shoot them from its mouth. Once the attack is over, the gang checks in with Svankmajer, who informs them that she, along with the rest of the scientists, are leaving town, and advises them to do the same. Fred sees past her after noticing a car hidden in front of the cave, and unmask the fiery Phantosaur after extinguishing it. As it turns out, it was Svankmajer and Winsor the whole time, wanting the scare of the town so that they could claim a treasure hidden deep underneath it: a completely crystallized and perfectly preserved Allosaurus body. Svankmajer wanted to keep it for herself, but was faced with the problem that it was property of the town.
Unfortunately, the caves begin to rumble, and as it turns out, Daphne had forgotten to turn off the paint-stripper, which was the device they used to shoot fire from the Phantosaur’s mouth, and the mines begin to explode due to (in)conveniently placed dynamite, originally planned for the use of uncovering the Allosaurus. They are forced deep within the mine, and their means of escape seem grim. Until somebody utters the magic words. Shaggy springs into action, leading them all the way through the caves to the end, where a crack of moonlight is just barely visible through the collapsing caves. The magic words are once again said on accident, and, still unable to figure out what it is, Shaggy is forced back to himself in the middle of a rushing underground river on top of a rock.
Shaggy is once again himself, but couldn’t have chosen a more inconvenient time. Fortunately for us, Fred convinces Shaggy to take the seemingly impossible jump to the side of the cave, where he can climb up and get help. With a movie line at the ready, Shaggy leaps, and barely clings to the side, pulling himself up with the help of Tex and his biker gang, who heard screams and explosions. The rest of the gang is hoisted up, and Svankmajer and Winsor are arrested. Mr. Hubbley’s equipment is returned, and he can finally restore Shaggy to his original self. However, the rest of the gang must have been standing too close, and the movie ends with the Mustard Machine driving away, containing five very confused, Shaggified members of Mystery Incorporated.
