I always loved how impish Fallon could be to those she loved. Pamela Sue Martin invested Fallon with so much dimension...and of course the writing was very good in the first four or five seasons.
As a fan of the first 2 seasons, it just seems weird to see Fallon be so nice to Krystle. And for Fallon to say that she had a feeling Alexis came back for revenge, she knew that to be a fact!
Their relationship evolved. Fallon was jealous of Krystle because she did not want to share her father. Krystle was an outsider to her. When Blake was out of it due to his grief over Steven's death--Fallon finally realized how much Krystle truly loved her father and they bonded over that. She grew up and quit playing the childish games and being a bitch to her. They reached a new understanding as does happen in life. I really loved their friendship mostly because of how they started.
The writing was actually all over the place in season 3, and went considerably downhill. People were so dazzled by the bling they didn't really care. Ratings continued to rise, and producers didn't care anymore about continuity or story development. They had a cash cow and they were going to milk it.