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The situation:

“太阳病不解，热结膀胱，其人如狂，血自下，下者愈。” (line 106a)

“其外不解者，尚未可攻，当先解其外；(line 106b)

外解已，但少腹急结者，乃可攻之，宜桃核承气汤。” (line 106c)

I’ve divided line 106 into three parts. Below is a clear explanation of each as i understand it:

a.  Patient is infected, say by a bacterial infection. He may manifest exterior signs like fever and body aches et al, but likely the bacteria (which manifests heat) has infected his urinary tract or bladder. She looks like she’s going to go crazy, but then blood (and likely all the pus) is urinated/passed out and her body manages to take care of the situation. And the symptoms (both exterior and the heaty bladder) go away.

b. If the exterior symptoms don’t go away, and the heaty bladder still remains, it’s advisable to first resolve the exterior, and only later purge the heaty pathogen in the bladder. I am thinking that Mr Zhang means to use prescriptions like 桂枝汤 or even 麻黄汤 to solve the problem. Which makes sense to me, because these exterior resolvers actually serve to cleanse the body via diuresis also. In fact, we may not even need to ‘attack’ using herbs that induce precipitation.

c. If the the exterior symptoms are resolved, but the pain in the bladder region persists, this is the time to ‘attack and purge’. Mr. Zhang feels that 桃核承气汤 is suitable.

Summary (as I understand it):

a. Both exterior and interior may resolve on their own. Blood coming out is a good sign.

b. Both exterior and interior are not resolved. Resolve the exterior.

c. Exterior is resolved but interior still accumulating heat. Purge the interior using 桃核承气汤.