Note: Credit to @Truffles, @Sparklefan1234, @PathfinderCS, and Silver-Quill for this review, which I C&P'd from here with extra edits. This review has been revised to include a little more content.

Sludge may be the most hateable non-villain of the series, if not one of them with Svengallop, Garble, Zephyr, and Spoiled Rich. Garble's someone to just hate, but Sludge you love to hate. This slob knows how to con others with no remorse. He wants to lives the luxury life and make you work for it, all the while tugging the right strings to make you fall for his tricks and divide you from who you love at your most vulnerable state. While he freeloads, he's not a stereotype, as he always cleans up after himself and trades his laziness for his brains. Smart, calculating, and very manipulative, he catches himself, remains convincing, and uses Spike's want for biological parentage to bypass all doubts.

Several clues indicate his scheming ways before he became more brazen:

1. He stopped jogging on the treadmill to chug the fresh cider…with hilarious results. XD
   
    
2. The Wonderbolts held him above them, but he won't fly until Dash lectures him.
    
3. He doesn't admit to being his father until after he fully recovers (just as he's about to depart) and walks with Spike back inside.
    
4. Just by his stops and gestures, he's making up his backstory as he goes along, including not answering other questions the RM5 asked, but his tale's canonically logical, and his tears sound real, adding a layer on uncertainty.
    
5. Silver-Quill brings up this point. Look at the image below:
   
   In this shot, she's nearly as tall as Torch, a monster-sized dragon.
   
   In the next, she's nearly as tall as Sludge, who's much smaller than him:
   
    
6. After his song, he cackles, cutting into Act 3.
    

7. Quote

   When a strange dragon crash lands in Ponyville claiming to be Spike's father, Spike is ready to do anything his "dad" says in order to learn how to be a "real" dragon.

   ^ The synopsis gives away a very important clue: "dad" and "real" are in skeptical quotes.
    

8. Quote

   Sludge: Not really.

   Quote

   Sludge: Sure! I'm not surprised you don't know any better. Twilight basically raised you as a pony. You're barely a dragon at all.

   Dismisses Spike after being asked if he wanted to do anything with his son and then casually accuses him of not being a "real" dragon, cutting deeply into his psyche.
    
9. His name has negative connotations related to muck and sewage. Despite being clean, his personality perfectly fits his name.

Because he's so conniving, I'm really glad he's not his father; if he was, he'd be a deadbeat. However, as excellent he is at crafting a façade, this leads to a few big problems I have with it, echoing from @Truffles's review, @Sparklefan1234's comment, and Discord conversations with @PathfinderCS.

1. Spike's hurtful comeback to Twilight absolutely crushes her, but doesn't have the weight. From the beginning of Act 3, the RM6 were already suspicious of him thanks to his sleazy manipulation of Spike and major holes in his backstory previously. Unfortunately, they can't prove anything, and Spike grew so close to him that telling him the truth without being delicate risks fracturing his relationships with the ponies. They must give him the benefit of the doubt and hope he doesn't brainwash him further. Emotionally, the delivery of disappointment feels stilted, further hurting its importance.
    
2. Spike doesn't truly figure out he was being used until after his conversation with Smolder, and their plan takes place off-screen. Afterwards, everything starts falling into place. Because he figured it out late and needs Smolder's off-screen advice for some closure, the pacing feels a little off.
    
3. No one can blame Spike for being so disappointed with Sludge revealing to be a phony. After getting so acquainted with him, his reveal's a major slap to his face. Yet, just before it concludes, he starts getting over it and feels mostly satisfied with the only family he has. But as this and DQ demonstrate, wanting to know his family roots matters to him, and he thought he was so close to actually figuring out who his biological father is. Heck, he revealed his scroll of things to do with them and was so happy to do them. As a result, Father Knows Beast's ending feels really hollow and forced.
    
4. Sludge's backstory, even with the holes, is plausible, and you can fill in the cracks with them. His sobs after telling them his story also feel real. The script and Allspark even built interesting and complex lore behind it with a very unique art style of its own, suggesting a degree of reality into his tale. At the time, he looked very sympathetic and acted like he wanted to reunite with his "lost son."
   
   So for FKB to use the Liar Revealed trope feels like a gigantic letdown, and Sludge's reveal alone is anticlimactic. Previous clues indicate he set Spike up, but one big unmentioned red flag is stating he searched everywhere for him. Why does it hurt the story? Because he never recognized Spike nor said his name until after he fully healed. It was only a matter of time before Smolder and Spike craft a plan to out himself for being the fraud that he is. I don't like to harp on predictability in FIM nowadays, because the journey determines the episode's success above the destination, but that blatant piece of foreshadowing really risks sucking the audience out of the story.

It's no surprise why many, myself including, feel dismayed. By revealing to NOT being his dad, the episode reverts to the status quo. After all this time, Spike's past remains a mystery. So despite a competent, nicely written story with a nicely song, great comedy (i.e., Sludge chucking SG out of the castle as she bathed ) and one of the best non-villain antagonists of the series, the resolve feels hollow. More could be done to tighten the plot or not feel so isolated from the rest of the series.

At the end, I still feel uncertain whether I like it or not. Even after I submitted my initial review in the discussion thread. Nevertheless, it's got some big positives.

1. Spike is very good here. He really wants to do the right thing and tries so hard to impress his "father." Here, we see his vulnerable side and one other flaw rarely exploited that well: his naiveté. He became so devoted with reuniting with what he thought was his biological father that he overlooks when he becomes a sleazy slob. Despite telling Twilight off, her worry clearly was on the back of his mind, evident by expressing his confusion towards Smolder. (This is also the first episode to refer to Spike as an orphan.) The audience sees his personality, how it was shaped, and (despite accusing her of being a fake parent) sympathize with them. His commitment for Sludge was genuine, which made his disappointment feel more crushing.
    
2. Twilight has one of her more mature secondary outings of the series. Throughout FKB, Twilight is more than Spike's friend, but mom, too (and he sees the others as his family). From thinking he let her down after he was quiet and turned away for so long (punctuated by a really funny pillow reveal XD) to hugging him after he admits to being orphaned. Spike's health and well-being matter to him and will do anything to make sure he's safe, even if it means probably upsetting him. When he revealed Sludge ditched him and wasn't his real dad, she consoled him immediately, equally upset with the results.
   
   These shots really show their love for each other:
   
   
    
3. Unlike Sludge, Smolder represented authentic dragondom despite their rough reputation, and she was great at it. When Twilight had trouble instructing Spike how to do tricks, she's there to help, explained that their parents teach them to fly when they're ready, and Spike offers a thank-you pillow to her, who doesn't sleep with pillows. Also, she knew Sludge phonied everything and worked with Spike to out him, because he treated her as his servant instead of his son. When he fled, she comforted him.
    
4. Sludge is a fantastic, competent, and clever antagonist. No need to repeat.
    
5. This is Dragon Quest (S2's worst episode by far) done right. How so?
   1. Recall the sexist implications and xenophobic stereotyping of dragons by the Mane Six. In DQ, while the RM5 watched dragons, they mocked Spike for looking "feminine" and proudly claimed that he's unlike the "other dragons" because of it. This sexism and xenophobia crossed over to teenage dragons, who are are written to represent dragondom, with Spike disowning his identity until Gauntlet of Fire. These implications are nonexistent here, and Haber wisely dignified dragon culture. Sludge claims he teaches Spike how to be a "real" dragon, but in reality, Sludge is a false representation of dragondom, while Smolder is. Guess who's in the right here.
       
   2. DQ's lesson actively uses racism in a positive light and treats the dragons other than Spike himself as savages in comparison to ponies, creating imperialistic implications that ponies are inherently superior. Thankfully, FKB handles a similar moral much better, this time focused on family over individuality, but Spike neither forgets nor abandons his dragon identity or sees dragon culture as a bad thing.
      
      Suspicions aside, they supported Spike's dad and worked with Spike to fulfill his wishes. They were all really charitable throughout the second montage:
      1. Pinkie and Fluttershy vs. Spike and Sludge in buckball (Granny Smith the ref):
         
          
      2. Rarity & Dash mimicking HW Day so they trade presents:
         
         
          
      3. Spike & Sludge bake and eat cupcakes together.
         
          
   3. Accusations of xenophobia from the ponies to dragons in DQ by bronies are justified, courtesy of their racist and sexist language. In FKB, no one acted like that at all, including Twilight. As mentioned previously, everyone's focused solely on Sludge being a terrible person, not because they believe dragons are primitive. When TS expressed concern, Spike retaliated with false accusations, which he apologized for.
       
   4. In DQ, Fluttershy agreed to watch the dragon migration after Dash agonizingly watched the butterfly migration, but punted her chest and cowered away. Here, Fluttershy actively helps him heal and no longer outwardly fears larger dragons.

Disappointment aside, is Father Knows Beast a good episode? I believe it is. Compared to the rest of its post-Matter streak, it's the weakest of the bunch, especially so after its excellent run from Road to Friendship to Sounds, but it's still competently written. Hopefully, it'll continue to hold up on its own and age better in the future, but right now, don't expect me to watch it again anytime soon.