Six months after Mr. Touchett's death, we are told about an exchange between Madame Merle and her friend Gilbert Osmond. Gilbert Osmond lives in his own house in Florence. The house is described as a "face" that seems to have heavy lids, but no eyes (197). It windows are described as defying the world to look inside, rather than being communicative. Inside, there is much padded furniture, tapestries, watercolor paintings, a gentleman named Gilbert Osmond, his daughter Pansy, and two nuns. Gilbert Osmond is described as having a studied look, with intelligent and observant eyes. His appearance suggests a "fine gold coin" but one that is not in the "general circulation" (199).
The child, Pansy, is studying a painting done by her father. The nuns report on the girl's education, describing the languages she has been exposed to, the drawing teacher, the sports she engages in, and so forth. He asks what they have made of her, and they respond that they have made her a Christian, and a "charming young lady" in whom there will be nothing but "contentment" (201). Little Pansy is described as being perfect and very much loved by the sisters of the convent. She is 15 years old.
Madame Merle arrives as the nuns are leaving to go back to Rome. Merle has apparently gone to see Pansy at the convent before, and will give some counsel as to how long Pansy will be educated in the convent.
When the nuns leave, Osmond suggests that they send Pansy out while they discuss whether or not she will stay in the convent. Madame Merle says that they do not need to because the subject of their conversation will be something that Pansy does not understand.
At the same time that Madame Merle brings up what is on her mind, Osmond notes that she is always doing things for her friends. Madame Merle declares that she cares greatly for her own self. Osmond retorts, "Exactly; but yourself includes so many other selves--so much of everyone else and of everything. I never knew a person whose life touched so many others." Madame Merle retorts: "What do you call one's life?" (207.) They end up sending Pansy away after this exchange.
Madame Merle tells Osmond that she will introduce him to Isabel. She tells him that he will "profit" by her knowledge of Isabel. Osmond asks if he will indeed "profit" (209). He asks if Isabel is "beautiful, clever, rich, splendid, universally intelligent, and unprecedentedly virtuous" (209), saying that he will only meet with her if that is the case. Madame Merle responds that Isabel is all of the above. He asks Merle what he means to "do" with Isabel. Madame Merle tells him that she will merely put Isabel in his way. "I don't pretend to know what people are meant for," she says, "I only know what I can do with them" (210). Osmond expresses sympathy for Isabel. He then compliments Merle for looking well; he knows that she has some "idea" and that it looks rather becoming on her. For once, Madame Merle loses her self-possession, and the two have a moment of looking each other face to face at an equal level. They both see it as an inconvenient to be known, but because it is mutual they are willing to accept this situation.
Merle wishes to Osmond that he were not so heartless. She takes a look at Osmond's picture and notes that she does not care for it. He believes his drawings are better than others'. Merle wishes he had had other ambitions, and he says that this is impossible. Merle compliments him on the taste in his well-furnished rooms.
Osmond asks once again if Miss Archer is rich, and Merle lets him know the exact number: she has seventy thousand pounds. Merle tells him that she wishes him to marry Isabel. Osmond says he does not understand her ambitions.
Merle notes that Pansy has had enough of the convent. She also remarks that Pansy does not seem to like her, even though the child is as "pure as a pearl" (213).
At Mrs. Touchett's place, the Palazzo Crescenti in Florence, Merle comes to visit. She arranges for Isabel and Gilbert Osmond to meet. When Osmond visits the house, Isabel is uncharacteristically silent, finding it more important to get an accurate impression of him than she finds it important to produce her own impression of him. Osmond, in spite of (or perhaps, because of) Isabel's silence is interested in her. He invites her to visit his house with Madame Merle sometime.
Isabel expects that Madame Merle will scold her for her silence and stupidity when Osmond leaves, but instead Merle tells her that she behaved just as she wished. Isabel feels displeasure at this comment, claiming that she is under no obligation to charm Mr. Osmond. Merle flushes at this. (She has unwittingly revealed her own intentions to Isabel here.)
When Isabel asks Ralph about Osmond, Ralph only knows that he is a vague, unexplained American who has lived for thirty years in Italy. He knows that Osmond dreads the vulgar, but other than that he has no special talents. Isabel says that she wants to have more information about him because it is better to know about one's dangers. Ralph responds that knowing that much may actually make people more dangerous. He cautions her to judge for herself.
Isabel has noticed that Ralph has something against Madame Merle. When she asks him what he thinks of her, he responds that he feels sorry for Madame Merle, that she was ambitious but unaccomplished. He finds her, in her overall aspect, to be an exaggerated person, never allowing others to have the chance to call her a fool.
Ralph thinks to himself that Isabel's friendship with Madame Merle will not last forever, noting that neither person knew the other as well as she supposed. He believes that each will discover the true nature of the other.
Gilbert Osmond is described as an aesthete. He has impeccable taste, but there seems to be something substantially lacking in him. His house is described in very sinister terms: it is a surface, just a "face" that bars communication with the outside. The architecture and style of his house is a symbol of Osmond's own personality. He is superficial and heartless, but appears to be very cultured. His relationship to his daughter is somewhat odd, because the daughter seems to admire him very much, even though he is not a very warm person. James' description of Osmond as a "coin" that is not in the general circulation is a hint at Osmond's own relation to commodities: he is a selfish hoarder, and has no interest in the communicative aspects of style.
The conversation between Merle and Osmond suggests a very intimate nature of their relationship, although why exactly this is the case is left obscure. They seem to be antagonistic in some respects, exchanging insults, but they are also very forthright with each other. They seem to both know each other too intimately, and the suggestion is that they typically do not allow others to have true knowledge of their character. It is unclear why Merle would want Isabel to marry Osmond, since she thinks highly of Isabel and she thinks Osmond is heartless. There is something sinister about Merle's dealings, especially because she declares that she does not know what Isabel is good for, but she only knows what she can "do with them." She makes it sound as if she will use Isabel for some purpose of her own, but we do not know how her plan of getting Isabel and Osmond to marry will benefit her.
Isabel is uncharacteristically silent and un-opinionated when she meets Osmond. She is more interested in gaining an accurate impression of him than of forming her own opinion of him -- this seems to be the exact opposite of her usual approach to people. This foreshadows to us that Osmond will be perceived differently than all her other suitors. Why though, is Isabel so reticent when she meets him? Ralph insinuates that Isabel's abundance of second-hand knowledge on his character is the reason she is so interested in him. It seems that Madame Merle has exploited Isabel's imaginative possibilities: the more Isabel thinks she "knows" the less she is able to experience for herself. This brings up an interesting theme that Henry James treats in other of his novels: What is the relationship between knowledge and experience? Does having knowledge of something prejudice us towards the way we experience it? Can one have an experience without having knowledge or prejudice about that thing? His short novel, What Maisie Knew, is one of his more extended explorations of this theme.