Warning: Spoilers ahead.
Daki is pissed. Tanjiro is able to defend against her obi belt attacks, but soon the other obi pieces fly back to her from underground, where the fight with the other demon slayers is happening.
The obi pieces actually go inside Daki and make her stronger. She transforms into a more powerful form with veiny white skin and white hair.
It seems the obi pieces also carry memories/information. So when they go into Daki, she learns about Hashira Uzui. She’s excited to kill him for her master, Muzan.
Then, some stupid loudmouth civillian house master starts yelling at Tanjiro and Daki to stop being so rudely noisy.
Tanjiro realizes the man has annoyed Daki, so he jumps in front of him to protect him and yells at all the witnesses to go back in their buildings. But Daki is too fast and OP now. In a flash, her obi rips through the surrounding buildings, killing many.
This enrages Tanjiro. His eyes fill with blood. And he too transforms. Daki leaps away to go find Uzui, but Tanjiro catches up to her with super speed and grabs her leg.
This is after we get a flashback of a letter written by Rengoku’s father apologizing for how he met Tanjiro. By the marking on Tanjiro’s head, he thinks Tanjiro possesses the special power of Sun Breathing. We see in this fight that it’s true. He can fight evenly with an Upper Rank, after all!
Tanjiro cuts off Daki’s leg but she grows it back quickly. Then Daki recollects memories from Muzan, because she has his cells. The memories are of Tanjiro’s father saying the same words as Tanjiro now. They cause Muzan’s cells/Daki’s hands to tremble in fear. Maybe Muzan can feel/see this battle?
Underground, Uzui’s wives Makio and Suma say Uzui should go after the Upper Rank demon. So he takes off and Inosuke and sleeping Zenitsu follow.
Daki tries to attack Tanjiro with what she thinks is an unstoppable eight-layered obi slash, but Tanjiro stops it. His Hinokami Kagura slices up her obi, and it causes her burning pain. She can’t regenerate from it. Tanjiro cuts off her head! But it connects back to her body with an obi.
Again Tanjiro is almost able to cut off her head, but the voice of Hanako tells him to stop. He’s not breathing and he almost died using Hinokami Kagura. Finally he collapses, coughing. And passes from exertion.
Daki is about to kill him, but Nezuko flies in and kicks off most of Daki’s head with a surprise attack! When Nezuko tries to kick Daki again, Daki is able to cut off Nezuko’s leg, arm and almost slice through her torso entirely!
Daki thinks there’s no way Nezuko can regenerate, as she’s a weak demon who doesn’t eat human. But Nezuko regenerates her body completely, as good as an Upper Rank! Now Nezuko transforms. One horn appears on her forehead and vine patterns cover her body. She’s able to cast an illusion that Daki sees to trick her. And pulverizes Daki with a stomp!