This is the episode that prompted me to look in more detail at what was going on in B5. I'm blindsided by it being the second episode every time, because to me it feels like it should be later, and so I assume it being where it is is a deliberate choice.
The first thing the episode does is introduce Doctor Stephen Franklin, the new chief medical officer. Easier to do in an episode that requires his services, but there are plenty of those that could easily have stood here instead. His services are needed because Sinclair, ever the hands-on commander, has rescued a ship that's dead in space and in danger of crashing into the station. The severely injured occupant is revealed to be a Soul Hunter, and the alien residents start leaving the station in droves.
Where the last episode makes it clear politics has a starring role, this one does it with religion and mysticism. Sinclair and Franklin are sceptical about what being a Soul Hunter actually means, but the aliens take it literally - so much so that Delenn tries to kill him. The Minbari believe in souls and reincarnation, and that Soul Hunters - who capture notable souls at death - diminish them as a people.
This episode also lays a seed, an ever so subtle one, of future events. In answering Franklin the soul hunter tells him to "ask your Commander Minbari friend". While at first this appears to be a scathing assessment of Sinclair as a friend to the Minbari, it can also be taken to mean "ask your friend, Commander Minbari." I don't think this is a coincidence in an episode that deals so heavily with souls and the Minbari perception of them, especially given that later it's revealed that Sinclair does, in fact, have a Minbari soul. It would perhaps have been too on the nose if the episode were later.
Other plot seeds this episode are that the Minbari appear to have plans for Sinclair, but the hints don't come from reliable sources - the obsession-crazed soul hunter ("They're using you!") and a semi-conscious Delenn ("We were right about you"). These sorts of things are scattered throughout, so I think the reason this episode is where it is to start building the underlying mythology and introduce the idea of more nebulous beliefs in a science fiction show.
It's this carefully layered foreshadowing that, I think, made Babylon 5 so successful as a story, and allowed the potentially contradictory elements of science and religion to fit comfortably together. Star Trek: Deep Space 9 did a similar thing (and was set on a space station and around at the same time, to boot) by showcasing the beliefs of the Bajoran people. The two shows approached it differently, of course. DS9 answered the question of whether science or religion was correct by answering "Why not both?" and having the Bajoran's holy Prophets also be aliens with a very different experience of the universe. B5 refused to answer it at all and let the characters and events speak for themselves.
I think this is why the Battlestar Galactica reboot failed so badly when it introduced the"Starbuck's been dead this whole time" plot twist. Although religious belief was shown in both humans and cylons, it wasn't layered in as part of the story. There are multitudes of articles out there about how the writers just threw Starbuck's resurrection in as something cool to do - and it shows. Despite weirdness with mandalas, visions, and Starbuck knowing the song the Final Five cylons heard, Starbuck as angel and saviour of mankind made no narrative sense and the show suffered for it.
In Babylon 5, it's all layered in, and now that I'm paying attention it's amazing to see just how deeply.