Continuity mistake: After Ben Affleck finds the bug in the machine, he pulls the bit out and turns to Uma Thurman. In that shot of Uma we see that Ben's got a big smile on his face. It then cuts immediately back to just Ben, who has a straight face and immediately cracks a big grin. (01:28:20)
Continuity mistake: Seattle seems to have a great number of blue Dodge Neons. During the motorcycle chase scene, we see a blue Dodge neon sedan no less then 5 times.
Continuity mistake: When Michael gets on the at the transit station, the camera pans down the bus aisle. The thief is not in the scene. The camera pans back to Michael then back down the aisle. The thief is now sitting in his seat.
Continuity mistake: When Michael is being chased by the agents, he goes through the transit station and hops on a bus. The camera shows the bus aisle. There is no street kid in the bus seat. When they pan back to Michael and then down the aisle again, the street kid is in his seat. A few other passengers have changed also. (00:35:15)
Continuity mistake: Throughout most of the movie Michael is wearing a white dress shirt that no matter what he does never seems to get any dirt or markings on it whatsoever. (This mistake pertains to after he does the 3 year job).
Answer: He does recognize Rachel from the party as well as when he when he saw her at Allcom. The only things he doesn't remember are the last three years of his life since starting the project. So, while he does remember her, the three years they spent together while at Allcom are a total blank. This recognition is shown when he meets with Porter who helps him escape.
But later, when he is going through her stuff, he says he doesn't remember her. Also, if he did remember her, he would have known it wasn't her when the imposter was in the restaurant (also no need to have the imposter try to dress like her either).