The One With The Dollhouse - S3-E20
Other mistake: The dollhouse is only partially burned when Ross takes it into the bathroom to extinguish it. When he shows it to Phoebe it's completely blackened and destroyed. He and Monica wouldn't have just let it burn; they would have extinguished it ASAP, and there's no reason why that wouldn't have been fast if they doused it in the shower.
Answer: The statements that she's contradicting (that it is common, it happens to every guy, and it's not a big deal), are the things that a woman commonly says to a man who is suffering from erectile difficulty, typically to assuage his bruised ego. However, most men do not believe that these statements are true, as evidenced by Chandler's outburst. He's so caught up in the proof that women are lying about it that he gives himself away.
Rooster of Doom