Audio problem: When Xander is talking to Blaine in the cell, Blaine is explaining what Miss French/She-Mantis does. At one point Blaine says "She ties you up, " but his mouth doesn't match the words at all. His mouth and the words match for every other line, so I'm assuming they decided to add that line in post.
Audio problem: After the opening credits, we see a band playing in the Bronze. The lead singer's mouth doesn't seem to 100% match what he's saying. It's mostly right, but just seems a little "off." (Ex. There's a few very brief moments where individual syllables seem to not match, etc.) It's very clear he's simply lip-syncing to a pre-recorded track.
Chosen answer: Angel is saying that he is still jealous and Buffy recognizes that this is his way of saying he wishes that they could be together. That is why they both smile.