Episode 3 came out this week and I have to say I liked it the best of the three so far; if the series continues to be this good I will be pretty happy.
While I was falling asleep last night, though, I thought about the episode some more and managed to confuse myself about what the Plot Device did, exactly. Spoilers and overanalysis follow ...
(The following all assumes that I remember what happened correctly, so if your recollection is different please say so.)
When the Plot Device is reassembled, it allows the user to peek into a possible future. (Given what half of the Device did, it seems likely that the full Device zooms in on a time of particular emotional energy, although ... but I will get to that later.)
Gwen uses the device and sees herself holding a bloody knife saying that Owen tried to kill "him". She talks to Captain Jack about it and he says that the future isn't set, that knowing what it is means you can change it. (Of course, outside the series we know that he used to own a time machine, so presumably he knows about this stuff ...) And, in fact, she does manage to avoid the particular future fortold by the Device, although not entirely to her liking.
So question #1 is: what actually happened in the averted future that she got a glimpse of? I think it went something like this: Gwen goes to talk to Bernie. The Torchwood team determines that Ed is going to Bernie's house and starts to follow him. Bernie goes outside, Ed kills him (or tries to kill him), Owen goes berserk and kills Ed, and Gwen wrestles the knife away from him (but too late). Gwen remembers her previous use of the Device, looks over to where she had been standing when she used it, and tries to warn her earlier self about what's coming up.
The result, maybe, is that Gwen is more on guard, manages to foil Ed's attack on Bernie, which then makes Owen a little more susceptible to reason.
The question is: What does the device do? The first explanation I thought of is that it takes the state of the world at the time it is activated and projects forward however many days. However, it doesn't take into account its own activation, since if it did, it's hard to see how the future it showed could be averted. This means that the Gwen in the averted future wouldn't have gotten the warning that Owen was going to go berserk.
This doesn't entirely work, though. Bernie foresaw his own death, but that death only occurred because what he saw when he activated it disturbed him so much that he broke the Device into two parts, one of which allowed him to see the past, which in turn allowed him to blackmail Ed, which in turn resulted in Ed killing him. (I suppose you could argue that we don't actually know that Bernie saw himself being killed by Ed; perhaps some other death was in store for him. Perhaps that death hasn't even been averted.) On a more basic level, averted-future Gwen knew which direction projected Gwen was going to be in, since she gave her warnings in the correct direction. (Although that could just be a cinematic convention meant to get across the mental link that apparently exists between the 'ghosts' seen via the Device and the Device's user.)
Maybe a more likely explanation is just that the Device simply doesn't work that well, so it gives you vague warnings of what the future might have in store, but those warnings are at best an approximation of what's going to happen. That makes for a less satisfying gadget, but it seems like it explains the events in the show better. (Of course, the show itself makes no claims about exactly what the device is or what it does.)
The final note about the Device's workings that I'd make is that, as I noted previously, since half of the Device homes in on places of strong emotion, it seems likely that the entire Device is supposed to home in on places of strong emotion in the future. But since seeing the future allows you to avert it, doesn't that mean that the strong emotion might end up not happening after all? Perhaps that's a moot point; in this episode, even though the foretold events didn't come about, the area was still certainly a place where a lot of people were really stressing out ...