Considering how you've set things up in the previous chapters of this story, yes this works well. I do like the fact here that Jim is aware that his romantic feelings for Pam haven't changed. He knows she's still the one he wants to be with. However given their history it makes sense that he's scared to open his heart again.

Yes having the moment pranking Andy was a great return to form, and along with his admission to Karen should have been a catalyst to try and seek out Pam more. However the way you have his thoughts here organized shows just how hard he took her rejections. The fear of being hurt again is very powerful even if it's not seen on the surface. However here in Jim's thoughts it's still there. If only he could realize how much he DIDN'T misinterpret, I'm sure he would have found his courage a lot sooner.

Author's Response: Thanks. I do wish Jim had (well, the writers had let Jim) come back to Scranton more single. Technically, sure, you might argue he wasn't actually dating Karen until they got there, but really? For me, that's the root of the cowardice, or at least the original act of it: not being able to face Pam on his own.