A Koan is a riddle used in some schools of ZenBuddhism. There is no point in trying to solve it intellectually. If you are enlightened, however, they will usually make perfect sense. The ones that don't make sense usually require some buddhist background or some understanding of ancient monastic traditions, so don't worry if you do not understand. (You need not worry either way -- being enlightened or not, hehe.)
I have never heard about any "correct" reaction to a Koan. In the absence of any explanation, I have a pet theory of my own. The story in many Koans is this: Two persons meet, A challenges B with a question, B gives an answer, one of them gets hit. Here are the possible outcomes:
Therefore, if a teacher ask you about a Koan and you are enlightened, laugh, dance, hit him, raise a finger -- whatever. If you get hit and you are enlightened, leave, for your teacher is not. If you are not enlightened, whatever you do will get you hit. :) Accept the lesson.
Anyway, I was asked by mail about the MuKoan. And I wrote it up. Perhaps you'd like to read it?
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