Well... the initial shock and anger has worn off.
I think they really have gone too far.
But what came across most to me this episode was what an amazing opportunity they missed.
I remember I thought after the 1st episode, that doing this in 2 episodes would be really cool. Then after the 2nd episode that using 3 was genius. After the third episode, I thought that it was too much.. but looking back I could understand it as a way to generate "water cooler" talk. Word of mouth is the best possible publicity after all.
This is where they messed up. Lets assume for a second that they had decided that 8 episodes of Endless Eight was what they wanted to do.
Okay, how about arranging it like this:
Episode 1: Keep the way it is, straight play of summer days having fun
Episode 2: Keep the way it is, the dramatic reveal that they are stuck in time loop- HOW MANY TIMES!?!?
Episode 3: Use the 4th or 5th iteration (better animation than the 3rd): The "WTH?!" response to not being resolved
Episode 4: Use the 4th or 5th iteration (better animation than the 3rd): Response "No way- they can't be doing this again!!!" Rage and despair among the fan base.
Episode 5: Kyon X Nagato episode.
This is what I realized watching this episode through during Kyon's following of Yuki and asking her if she was okay. He paused, and didn't turn away- I thought: "Ah what's this? Is something different going to happen?". Now I'm not suggesting anything really happen between Nagato and Kyon- just Ship Tease the heck out of us. After Nagato says she's okay, have Kyon offer her a ride home on his bike. At the festival have Kyon insist on buying the mask for her. Maybe even have Yuki warn him against doing it and have Haruhi act a jealous (no free food for you Kyon!). Have Haruhi confront Kyon later (with the excuse that she needs to "protect" Yuki), and have him make up some excuse about Nagato being sad about something- maybe have Kyon say something stupid about how he prefers girls with long hair anyway- and then have Haruhi wear a ponytail to the next activity. By episode end, Haruhi and Kyon have gone back to status quo, and Kyon fails again to solve the loop.
Fan Reaction: Massive debate about something other than why the loop hasn't ended. "That's not in the novel!" "Who cares? The loop erases it, so it doesn't count anyway!"
Episode 6: Kyon x Mikuru episode: I don't know what kind of plot to follow here but basically do the same as last episode- ship tease the heck out of us. This will establish a pattern, building up to the anticipated Kyon X Haruhi episode.
Episode 7: Kyon x Haruhi: Will this finally end the loop? (They could still do this, and if they do it might actually salvage the Endless Eight arc.)
Spoiler for How I would handle a Kyon X Haruhi Endless Eight episode: 'Kyon's Test of Courage!':
In all the previous episodes the "Test of Courage" scenes have always had different pairing of who is doing the scaring, and who is paired to face the test. Rush through the first part of the episode and then after the discussion between Kyon and Kozumi during stargazing- have an expanded "Test of Courage" scene with Haruhi and Kyon paired up to face the test.
Kyon struggles with his thoughts as he deliberates putting his arm around Haruhi. "Why do I have to do this with this girl?" "No- it's for the worlds sake" "It's for Nagato- so she won't have to live through this again." "It's for Asahina-san, so she can contact the future again." "It's for Kozumi... Wait, actually I could care less about Kozumi." "But still, I don't want to have to keep living these two weeks over and over again." Glance over at Haruhi. "Why do you always do these things Haruhi?" "Well, it's not like this isn't common during a test of courage- I can always excuse myself later that it didn't really mean anything right?" "It's just the test of courage-" Kyon slowly raises his trembling arm to put around Haruhi's shoulders, acting as if he's about to hug a very dangerous Oni. He lowers his arm to Haruhi's shoulders.
Haruhi stiffens in shock. Then she jerks away with an elbow to Kyon's sternum. "Baka, what are you doing?" she exclaims, with a slight blush, before putting on a knowing smile. "Ah I get it, you were thinking of taking advantage of a girl during the test of courage. Bad Kyon. Good thing I didn't let you do this with Yuki or Mikuru-chan. They wouldn't have known how to stop you."
Kyon explains that that isn't how it is at all. "Oh really," says Haruhi "You were just scared? Well I guess it can't be helped." Haruhi grabs Kyon's hand and begins to stride off. "I'll just have to hold your hand then- I didn't think you were such a little boy Kyon." Haruhi forcefully stares away from Kyon in the direction she's walking, so Kyon doesn't see her blush.
As Kyon is dragged along he glances down at Haruhi's death grip on his hand and then facepalms. "How did it end up like this?"
Run through the few remaining events with some awkward glances between Haruhi and Kyon. Then at the ending, have Haruhi walk away as usual. Kyon glares at Kozumi, and thinks to himself that this had better work. Cut to Kyon deciding to do his homework, just in case. Again he fails to complete it (see 1st episode), Kyon goes to bed thinking that even though he didn't finish his homework he still ought to get extra points for saving the world.
Now wouldn't that be epic? Would that be worth it?